COVER SHEET

A 1 9 9 9 1 0 0 6 5

SEC Registration Number

C O L F I N A N C I A L G R O U P , I N C . A N D S U B S I

D I A R Y

(Company’s Full Name)

2 4 0 1 B P h i l i p p i n e S t o c k E x c h a n g e C

e n t r e , E x c h a n g e R o a d , O r t i g a s C e n

t e r , P a s i g C i t y

(Business Address: No. Street City/Town/Province)

Ms. Catherine L. Ong 636-54-11

(Contact Person) (Company Telephone Number)

1 2 3 1 17-Q

Month Day (Form Type) Month Day

(Calendar Year) September 30, 2016 (Annual

Meeting)

Broker

(Secondary License Type, If Applicable)

CFD Not Applicable

Dept. Requiring this Doc. Amended Articles Number/section

Total Amount of Borrowings

32

Total No. of Stockholders Domestic Foreign

To be accomplished by SEC Personnel concerned

File Number LCU

Document ID Cashier

S T A M P S

Remarks: Please use BLACK ink for scanning purposes.

2

SECURITIES AND EXCHANGE COMMISSION SEC FORM 17-Q

QUARTERLY REPORT PURSUANT TO SECTION 17 OF THE SECURITIES

REGULATION CODE AND SRC RULE 17(2)(b) THEREUNDER

1. For the quarterly period ended: September 30, 2016

2. Commission identification number A199910065

3. BIR Tax Identification No. 203-523-208-000

4. Exact name of issuer as specified in its charter: COL FINANCIAL GROUP, INC.

5. Province, country or other jurisdiction of incorporation or organization: Pasig City,

Philippines

6. Industry Classification Code: (SEC Use Only)

7. Address of issuer's principal office: Postal Code: 1605

2401-B East Tower, Philippine Stock Exchange Centre, Exchange Road, Ortigas

Center, Pasig City

8. Issuer's telephone number, including area code: (632) 636-5411

9. Former name, former address and former fiscal year, if changed since last report: Not

Applicable

10. Securities registered pursuant to Sections 8 and 12 of the Code, or Sections 4 and 8 of the

RSA:

Title of each Class Number of shares of common stock

outstanding and amount of debt outstanding

Common 476,000,000 shares

11. Are any or all of the securities listed on the Philippine Stock Exchange?

Yes [ x ] No [ ]

12. Indicate by check mark whether the registrant:

(a) has filed all reports required to be filed by Section 17 of the Code and SRC Rule

17 thereunder or Sections 11 of the RSA and RSA Rule 11(a)-1 thereunder, and

Sections 26 and 141 of the Corporation Code of the Philippines, during the

preceding twelve (12) months (or for such shorter period the registrant was

required to file such reports)

Yes [ x ] No [ ]

(b) has been subject to such filing requirements for the past ninety (90) days.

Yes [ x ] No [ ]

3

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

The unaudited consolidated financial statements are filed as part of this Form 17-Q.

Item 2. Management’s Discussion and Analysis (MD&A) of Financial Conditions and

Results of Operations.

The following is a discussion and analysis of the financial performance of COL Financial Group,

Inc. (COL, COL Financial or the Parent Company) and COL Securities (HK) Limited (the HK

Subsidiary or COLHK) collectively referred to as “The Group”. The discussion aims to provide

readers with an appreciation of its business model and the key factors underlying its financial

results. The MD&A should be read in conjunction with the unaudited consolidated financial

statements of the Group filed as part of this report.

Company Overview

COL Financial Group, Inc. is the leading online financial services provider in the Philippines. It

aims to be the most trusted wealth-building partner of every Filipino, providing practical and

ethical financial products through value-driven and innovative solutions to help them achieve

their financial goals.

As of end September 30, 2016, COL had more than 195,000 customers and P62.0 billion in

consolidated net customer assets. It has also been the number one brokerage in the Philippine

Stock Exchange (PSE) in terms of number of transactions executed since 2008.

COL's main offering is its proprietary online trading platform. Through www.colfinancial.com,

COL offers real-time market information and execution, superior investing tools and

functionalities, and comprehensive stock market research and analysis to guide independent

investors make well informed investment decisions.

COL also remains committed to its advocacy of investor education for its customers and the

investing public by regularly providing free seminars. These are scheduled weekly and are held

at the COL Training Center with topics ranging from the basics of stock and mutual funds

investing and how to trade online to the more advanced topics for the active traders.

As part of COL’s commitment to provide more useful products and services to help its

customers build genuine wealth, COL launched in July 2015 the first and only online fund

supermarket in the country, called COL Fund Source. It is the first and only online mutual fund

supermarket in the Philippines which provides investors access to a wide selection of mutual

funds. This new service allows COL to further strengthen its existing relationship with its

customers as well as expand its reach to more Filipino investors, particularly those who either do

not have the time to actively manage their investments or are looking for a professionally

managed diversified portfolio of stocks, bonds and other fixed income instruments.

COL also provides investors online access to the HK stock market through its wholly owned

foreign subsidiary COL Securities (HK) Limited. In 2015, COLHK launched its new trading

platform called “COL Global Access” which aims to improve and expand the online trading

experience of its clients in Hong Kong by giving them direct market access to trade global

equities in a single platform and universal account.

Going forward, COL Financial will continually seek to maintain the loyalty and trust of its

customers by offering them a meaningful and financially rewarding investing experience.

4

Business Model

COL Financial derives a significant proportion of its revenues from its stock brokerage business

in the Philippines. Most of the revenues generated from its Philippine operations include: (1)

commission generated from stock trades, (2) interest income from margin financing, and (3)

interest income made from short-term placements.

COL also derives revenues from the commissions earned by its stock brokerage business in HK

through its wholly owned subsidiary COLHK.

With its solid foundation deeply rooted in its core values of passion, integrity, commitment,

excellence and teamwork, COL is well-positioned to capitalize both on the anticipated

development of the capital markets as well as the vast opportunities of increasing the retail

investor base in the Philippines.

Industry and Economic Review

The Philippine stock market had a volatile performance during the first nine months of 2016.

From 6,952.08 during the start of the year, the PSEi fell by as much as 12.5% to a low of

6,084.28 in January, rallied to high of 8,102.3 in August, before closing at 7,629.73 by the end

of September 2016.

Investor sentiment was extremely negative during the start of the year, brought about by several

factors including disappointing corporate earnings results, the weak performance of the Chinese

economy and its currency, the poor performance of other Asian markets, the U.S. Fed’s decision

to proceed with its first rate hike, falling prices of commodities including oil, the weakness of

emerging market currencies including the peso and the rise in local interest rates.

Sentiment for stocks improved briefly from March to August, after global central banks

announced fresh stimulus measures and after the U.S. Fed signaled that it was not about to

increase interest rates anytime soon. As a result, the dollar weakened while interest rates in the

secondary market fell. This in turn led to the increase in oil and other commodity prices, the

strengthening of emerging market currencies including the peso and the drop in local interest

rates. The peaceful conclusion of the local presidential elections and investors’ favorable view

towards the country’s newly elected President Rodrigo Duterte also helped boost the

performance of the stock market.

However, the market’s recovery was cut short after the U.S. Fed began to hint that it was ready

to resume its interest rates hike cycle. President Duterte’s negative reaction to criticisms against

his war on drugs and his anti-U.S. rhetoric also negatively affected sentiment for the stock

market.

Value turnover in the Philippine Stock Exchange (PSE) remained thin. Average daily value

turnover fell by 15.2% to P8.0 billion during the nine months of 2016 compared to the same

period in 2015.

In contrast, the HK stock market recovered during the third quarter of the year after performing

poorly during the first half of 2016. The market rebounded after the Chinese economy started

showing signs of stabilization. For example, China’s industrial production stayed above 6%

since March of this year. Retail sales growth also accelerated to 10.6% in August after falling to

a low of 10% in May. As of end September, the Hang Seng index (HSI), the Hang Seng China

Affiliate Corp. Index (HSCCI) and the Hang Seng China Enterprise Index (HSCEI) ended

higher by 12.0%, 6.5% and 10.0% respectively compared to their end June 2016 levels. Average

daily turnover also increased slightly to HKD67.8 billion during the third quarter from HKD67.2

billion during the first half of 2016, although it was still well below the 2015 average of

HKD105.1 billion.

5

Business Review

Key Performance Indicators

The management of COL Financial regularly reviews numerous Key Performance Indicators or

KPIs to determine whether or not it is on track to meet the organization’s long term goals. KPIs

are quantifiable measurements that reflect an organization’s critical success factors. Below are

some of the KPIs regularly reviewed by management to determine whether or not it is enhancing

the value of its shareholders:

September 30, 2016 September 30, 2015

Number of Customer Accounts 196,026 152,979

Customers’ Net Equity (in millions) P62,269.3 P47,768.9

Net Revenues (in millions) P658.7 P583.9

Annualized Return on Equity 31.1% 25.5%

Risk Based Capital Adequacy Ratio* 619.0% 575.0%

Liquid Capital** (in millions) HKD24.7 HKD32.6 *Parent Company only

**HK Subsidiary

Despite the volatile trading environment in the PSE, the number of customer accounts for

COL’s Philippine operations expanded by 20.3% for the year to date period to more than

190,000 as of end September 2016. COL’s client base continued to grow as it remained active in

educating and encouraging Filipinos to save and invest. It also continued to benefit from the

heightened interest among Filipinos to invest outside of traditional fixed income instruments

brought about by the low interest rate environment.

Net equity of customers also continued to grow, increasing to P62.3 billion as of end September

2016 from P47.8 billion as of end 2015. This included net new cash inflow amounting to P4.9

billion during the first nine months of 2016.

Even with the challenging operating environment, COL’s revenues during the first nine months

of 2016 increased by 12.8% to P658.7 million. Although trading activity in the PSE fell

compared to year ago levels, commission revenues from COL’s domestic operations managed to

grow by 32.8% as the Parent Company’s market share in terms of value turnover improved to

5.9% from 3.9%. The significant increase in COL’s commission revenues from domestic

operations was partly offset by the weak performance of its HK operations and the drop in

interest income. During the first nine months of 2016, COL’s revenues from HK dropped by

70.0% to only P8.4 million while interest income fell by 7.4% to P164.5 million, largely driven

by the 43.6% decline in the average value of margin loans.

Return on average equity (ROE) also improved to 31.1% in the first nine months of 2016 from

25.5% during the same period in 2015 due to COL’s strong earnings performance.

During the first nine months of 2016, both COL (Parent Company) and its HK subsidiary

continued to meet the stringent rules of regulators in the Philippines and Hong Kong. As of end

September 2016, the Parent Company’s Risk Based Capital Adequacy Ratio (RBCA) reached

619%, well above the minimum requirement of 110%. Meanwhile, COL HK had HKD24.7

million of liquid capital. This is also well above the minimum requirement of HKD3.0 million

or 5% of adjusted liabilities.

Material Changes in the Financial Position (September 30, 2016 vs December 31, 2015)

COL’s financial position remained strong with a high level of cash and zero interest bearing

debt.

Despite the somewhat challenging operating environment, COL’s assets continued to grow,

6

increasing by 30.2% to P10.4 billion compared to its end 2015 level of P8.0 billion. The growth

was largely funded by non-interest bearing liabilities as trade payables jumped by 35.4% to P8.9

billion. Trade payables rose largely due to the increase in customers’ cash balance which in turn

was a result of the significant growth in COL’s client base.

Cash and cash equivalents composed mainly of cash in banks and short-term placements

increased by 31.5% to P8.5 billion as of end September 2016, also largely due to COL’s growing

client base and the resulting increase in their cash balances. As discussed earlier, net inflow of

funds amounted to P4.9 billion during the first nine months of 2016.

Cash in a segregated account booked by COL’s HK Subsidiary decreased by 23.4% to P195.6

million due to net withdrawals made by some customers in light of poor market conditions in the

Chinese market.

Trade receivables increased from P1.1 billion as of end 2015 to P1.3 billion as of end

September 2016. Trade receivables increased as the value of outstanding margin loans reached

P741.0 million as of end September, up from P639.5 million as of end 2015. Net buying

transactions of institutional investors amounting to P81.0 million that are within the settlement

period also contributed to the increase in trade receivables.

Financial assets at fair value through profit or loss (FVPL) increased by 24.5% to P2.1

million.

Other non-current assets increased by 1,783.0% largely due to the allocation of P200.0 million

in long term deposit maturing in June, 2021 that bear higher interest rates.

As discussed earlier, Trade payables, which account for more than 90% of total liabilities,

jumped by 35.4% to P8.9 billion. The increase was driven by the continuous growth in COL’s

client base and their corresponding cash balances.

Other current liabilities decreased by 18.3% to P48.3 million as a result of the distribution in

January 2016 of the performance bonuses accrued in 2015 and the remittance to the BIR of the

corresponding taxes.

Stockholders’ equity increased by 6.2% or P82.3 million to P1.4 billion due to the booking of

P316.9 million in net income during the first nine months of 2016, partly offset by the payment

of P237.5 million worth of cash dividends to shareholders.

Material Changes in the Results of Operations (September 30, 2016 vs September 30,

2015)

COL’s consolidated revenues during the first nine months of 2016 were up by 12.8% to P658.7

million as the strong growth of commission revenues from the Philippines was able to offset the

decline in interest income and the weak performance of HK operations. Cost of services

increased by 12.3% to P152.1 million as various trade related expenses including commission

costs, stock exchange dues and fees, and central depository fees rose in line with the increase in

clients’ trading activity in the PSE. Communication costs also went up as COL took steps to

improve its ability to service its growing client base. However, total operating expenses fell by

19.7% to P96.9 million due to the absence of tax assessments this period. Provision for income

taxes increased by 13.9% to P92.8 million, slower than the 25.0% increase in operating profits.

As a result of the foregoing movements, net income was higher by 23.4% to P322.9 million on

a year-on-year basis.

COL’s revenues increased as the strong growth of commission revenues from the

Philippines was able to offset the decline of interest income and the weak performance

7

of HK. Commission revenues from the Philippines improved by 32.8% to P483.4

million as the favorable impact of COL’s growing client base was able to offset the

weaker overall trading volume in the PSE. Commission revenues increased despite the

12.0% drop in the PSE’s value turnover as COL’s market share improved from 3.9%

during the nine-month period in 2015 to reach a new record high of 5.9% during the

same period in 2016. Growth was led by self-directed clients which registered a 41.6%

increase in commission revenues and now account for 68.9% of Philippine commission

revenues.

On the other hand, commission revenues from HK dropped by 72.7% to P7.4 million

due to weak market conditions in HK.

Interest income also fell by 7.4% as the average value of margin loans dropped by 43.6% on a

year-on-year basis. Despite the pickup in the value of margin loans towards the end of

September, average margin receivable fell to P591.2 million during the first nine months of 2016

from P1.0 billion during the same period last year as volatile market conditions prompted clients

to reduce their utilization of margin loans.

Cost of services increased by 12.3% to P152.1 million as trade related expenses, namely

commission costs, stock exchange dues and fees, and central depository fees rose by 12.8% to

P94.2 million, in line with the increase in clients’ trading activity. Communication cost also went

up by 23.4% as COL increased its capacity to service its growing client base.

As discussed earlier, operating expenses fell by 19.7% to P96.9 million, as the Parent Company

was not subjected to tax assessments as of end of the reporting period. The Parent Company also

initiated cost cutting measures in 2016 that led to the reduction in other expenses including bank

charges and office supplies.

Coupled with the increase in bandwidth capacity (as reflected in higher communication costs),

COL invested in new hardware and software technologies to improve its ability to service its

growing client base. This in turn explains the 5.6% increase in the depreciation expense. COL

also engaged the services of more consultants to help the Parent Company expand its product

and service offerings which resulted to the 13.1% increase in professional fees from P18.8

million to P21.3 million.

Due to the strong growth of COL’s Philippine operations and the absence of deficiency taxes

assessed against the Parent Company this year, operating profits jumped by 25.0% to P409.7

million. Net profits increased by a slightly faster pace of 28.6% to P316.9 million as provision

for income taxes rose by only 13.9% to P92.8 million.

Other Matters

a. We are not aware of any known trends, demands, commitments, events or uncertainties

that will have a material impact on the Group’s liquidity. The Group has not defaulted in

paying its obligations which arise mostly from withdrawals made by customers. In

addition, obligations of the Parent Company are fully funded in compliance with the

Securities Regulation Code (SRC) Rule 49.2 while the HK Subsidiary maintains a fund

for the exclusive benefit of its customers in compliance with the regulations of the

Securities and Futures Commission of Hong Kong.

b. We are not aware of any events that will trigger direct or contingent financial obligation

that is material to the Group, including any default or acceleration of an obligation.

c. We are not aware of any material off-balance sheet transactions, arrangements,

obligations (including contingent obligations) and other relationships of the Group with

other persons created during the reporting period.

8

d. We are not aware of any material commitments for capital expenditures.

e. We are not aware of any known trends, events or uncertainties that have had or that are

reasonably expected to have a material favorable or unfavorable impact on net sales or

revenues or income from continuing operations of the Group.

f. We are not aware of any significant elements of income or loss that did not arise from the

Group’s continuing operations.

g. We are not aware of any seasonal aspects that had a material effect on the financial

condition or results of operations of the Group.

9

PART II – OTHER INFORMATION

Not applicable. There are no material disclosures that have not been reported under SEC Form

17-C covered by this period.

11

COL FINANCIAL GROUP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

September 30, 2016 (Unaudited) December 31, 2015 (Audited)

Money Balance

Security Valuation

Money Balance

Security Valuation

Long Short Long Short

ASSETS

Current Assets

Cash and cash equivalents (Note 4) P=8,539,155,127 P=6,493,600,095

Cash in a segregated account (Note 5) 195,649,529 255,596,013

Financial assets at fair value through profit or loss (FVPL; Note 6) 2,083,488 P=2,083,488 1,673,427 P=1,673,427

Trade receivables (Note 7) 1,249,852,905 4,573,337,445 1,075,809,699 3,700,094,576

Other receivables (Note 7) 17,508,732 8,425,177

Prepayments 4,451,798 2,097,787

Total Current Assets 10,008,701,579 7,837,202,198

Noncurrent Assets

Property and equipment (Note 8) 68,746,401 44,268,412

Intangibles (Note 9) 24,848,499 24,413,383

Deferred income tax assets-net (Note 17) 35,522,119 35,558,643

Other noncurrent assets (Note 10) 214,405,987 11,388,382

Total Noncurrent Assets 343,523,006 115,628,820

TOTAL ASSETS P=10,352,224,585 P=7,952,831,018

Securities in box, in Philippine Depository and Trust Corporation

and Hong Kong Securities Clearing Company, Limited P=54,872,773,130 P=43,011,188,066

(Forward)

12

September 30, 2016 (Unaudited) December 31, 2015 (Audited)

Money Balance

Security Valuation

Money Balance

Security Valuation

Long Short Long Short

LIABILITIES AND EQUITY

Current Liabilities

Trade payables (Note 11) P=8,851,193,137 P=50,297,352,197 P=6,539,148,312 P=39,309,420,063

Other current liabilities (Note 12) 48,247,716 59,026,457

Income tax payable 27,183,519 11,387,517

Total Current Liabilities 8,926,624,372 6,609,562,286

Noncurrent Liability

Retirement obligation (Note 16) 26,277,714 26,277,714

Total Liabilities 8,952,902,086 6,635,840,000

Equity (Notes 13 and 16)

Capital stock 476,000,000 475,000,000

Capital in excess of par value 53,219,024 53,219,024

Cost of share-based payment – 4,031,571

Accumulated translation adjustment 694,792 (5,241,859)

Loss on remeasurement of retirement obligation (4,836,196) (4,836,196)

Retained earnings:

Appropriated 198,811,471 169,021,759

Unappropriated 675,433,408 625,796,719

Total Equity 1,399,322,499 1,316,991,018

TOTAL LIABILITIES AND EQUITY P=10,352,224,585 P=54,872,773,130 P=54,872,773,130 P=7,952,831,018 P=43,011,188,066 P=43,011,188,066

See accompanying Notes to Consolidated Financial Statements.

13

COL FINANCIAL GROUP, INC. AND SUBSIDIARY

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

For the Nine Months Ended

September 30

For the Quarter Ended

September 30

2016 2015 2016 2015

REVENUES

Commissions P=490,849,878 P=391,128,692 P=197,640,326 P=120,308,075

Others:

Interest income (Note 14) 164,503,344 177,613,326 59,576,540 57,388,277

Gain on financial assets at FVPL - net (Note 6) – 10,968,644 – – Others 3,377,162 4,231,566 1,363,071 1,157,984

658,730,384 583,942,228 258,579,937 178,854,336

COST OF SERVICES

Commission expense (Note 18) 75,373,943 67,785,220 28,605,884 19,963,096

Personnel costs (Note 15) 33,799,543 32,147,357 10,313,635 9,299,669

Stock exchange dues and fees 11,913,610 9,270,919 4,751,234 2,911,345

Central depository fees 6,996,989 6,496,051 2,582,266 3,503,821

Others:

Communications 22,358,210 18,115,730 7,869,749 6,376,748

Others 1,701,737 1,644,084 546,952 613,857

152,144,032 135,459,361 54,669,720 42,668,536

GROSS PROFIT 506,586,352 448,482,867 203,910,217 136,185,800

OPERATING EXPENSES

Administrative expenses:

Professional fees (Note 18) 21,269,765 18,808,705 6,737,070 5,662,511

Personnel costs (Note 15) 19,385,933 19,327,407 4,839,676 5,880,237

Rentals (Note 19) 10,503,055 10,147,001 3,584,953 4,017,525

Advertising and marketing 8,318,260 7,990,195 4,932,947 1,943,277

Security and messengerial services 3,532,682 2,929,553 1,373,019 1,007,804

Taxes and licenses 3,424,698 27,195,994 1,133,384 24,844,528

Power, light and water 3,079,355 3,169,834 1,080,554 1,106,537

Insurance and bonds 2,456,440 2,077,237 896,985 822,187

Office supplies 1,983,265 2,738,742 814,693 744,123

Condominium dues 1,844,381 1,703,755 602,117 747,503

Repairs and maintenance 1,690,031 1,365,721 565,491 599,199

Trainings, seminars and meetings 1,002,173 628,295 249,409 49,214

Representation and entertainment 745,863 993,348 202,858 317,415

Membership fees and dues 605,272 680,940 195,303 229,177

Transportation and travel 529,528 589,074 157,481 166,996

Communications 518,167 465,387 208,364 156,834

Bank charges 431,063 4,151,238 27,216 1,463,401

Directors’ fees 350,000 290,000 80,000 100,000

Others 1,700,511 2,092,940 505,110 631,571

83,370,442 107,345,366 28,186,630 50,490,039

Depreciation and amortization (Note 8) 13,225,021 12,530,094 4,388,999 3,707,787

Loss on financial assets at FVPL - net (Note 6) 293,928 – 343,790 97,426

Foreign exchange losses - net – 745,212 – 224,117

96,889,391 120,620,672 32,919,419 54,519,369

INCOME BEFORE INCOME TAX 409,696,961 327,862,195 170,990,798 81,666,431

PROVISION FOR (BENEFIT FROM) INCOME

TAX (Note 17)

Current

Regular corporate income tax 74,914,977 69,818,283 30,086,010 20,477,084

Final income tax 23,767,672 15,607,665 8,980,103 6,357,548

Deferred (5,912,089) (3,965,597) (1,749,025) (1,948,056)

92,770,560 81,460,351 37,317,088 24,886,576

NET INCOME P=316,926,401 P=246,401,844 P=133,673,710 P=56,779,855

See accompanying Notes to Consolidated Financial Statements.

14

COL FINANCIAL GROUP, INC. AND SUBSIDIARY

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Nine Months Ended

September 30

For the Quarter Ended

September 30

2016 2015 2016 2015

NET INCOME P=316,926,401 P=246,401,844 P=133,673,710 P=56,779,855

OTHER COMPREHENSIVE INCOME

Item that may be reclassified subsequently to

profit or loss:

Translation adjustments - net of tax 5,936,651 15,241,699 7,525,236 11,167,399

TOTAL COMPREHENSIVE INCOME P=322,863,052 P=261,643,543 P=141,198,946 P=67,947,254

Earnings Per Share (Note 24) Basic P=0.67 P=0.52 P=0.28 P=0.12

Diluted 0.67 0.52 0.28 0.12

See accompanying Notes to Consolidated Financial Statements.

15

COL FINANCIAL GROUP, INC. AND SUBSIDIARY

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016

(With Comparative Figures for the Nine Months Ended September 30, 2015)

Capital

Stock

Capital in Excess of

Par Value

Cost of Share-Based

Payment

Accumulated Translation

Adjustment

Loss on

Remeasurement of Retirement

Obligation

Retained Earnings

Total Appropriated Unappropriated

Balances at January 1, 2016 P=475,000,000 P=53,219,024 P=4,031,571 (P=5,241,859) (P=4,836,196) P=169,021,759 P=625,796,719 P=1,316,991,018

Cost of share-based payment (Note 16) – – (4,031,571 ) – – – – (4,031,571)

Issuance of shares (Note 13) 1,000,000 1,000,000

Declaration of cash dividend (Note 13) – – – – – – (237,500,000) (237,500,000)

Net income for the period – – – – – – 316,926,401 316,926,401

Other comprehensive income – – – 5,936,651 – – – 5,936,651

Total comprehensive income for the period – – – 5,936,651 – – 316,926,401 322,863,052

Appropriation of retained earnings (Note 13) – – – – – 29,789,712 (29,789,712) –

Balances at September 30, 2016 P=476,000,000 P=53,219,024 P=– P=694,792 (P=4,836,196) P=198,811,471 P=675,433,408 P=1,399,322,499

Balances at January 1, 2015 P=474,550,000 P=53,219,024 P=5,499,602 (P=21,814,947) (P=4,400,783) P=140,028,578 P=629,371,558 P=1,276,453,032

Cost of share-based payment (Note 16) – – (1,419,551) – – – – (1,419,551)

Issuance of shares (Note 13) 450,000 – – – – – – 450,000

Declaration of cash dividend (Note 13) – – – – – (237,275,000) (237,275,000)

Net income for the period – – – – – – 246,401,844 246,401,844

Other comprehensive income – – – 15,241,699 – – – 15,241,699

Total comprehensive income for the period – – – 15,241,699 – – 246,401,844 261,643,543

Appropriation of retained earnings (Note 13) – – – – 28,993,181 (28,993,181) –

Balances at September 30, 2015 P=475,000,000 P=53,219,024 P=4,080,051 (P=6,573,248) (P=4,400,783) P=169,021,759 P=609,505,221 P=1,299,852,024

See accompanying Notes to Consolidated Financial Statements.

16

COL FINANCIAL GROUP, INC. AND SUBSIDIARY

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30

2016 2015

CASH FLOWS FROM OPERATING ACTIVITIES

Income before income tax P=409,696,961 P=327,862,195

Adjustments for:

Interest income (Note 14) (164,503,344) (177,613,326)

Depreciation and amortization (Note 8) 13,373,410 12,666,231

Unrealized loss (gain) on financial assets at FVPL (180,534) 1,134,655

Dividend income (Note 6) (26,629) (20,815)

Gain on disposal of property and equipment (4,365) (1,069)

Operating income before working capital changes 258,355,499 164,027,871

Changes in operating assets and liabilities:

Decrease (increase) in:

Cash in a segregated account 59,946,484 (121,998,077)

Financial assets at FVPL (229,526) 6,477,207

Trade receivables (159,177,163) 321,230,644

Other receivables 20,614,561 4,933,683

Prepayments (2,350,899) (3,346,019)

Other noncurrent assets (10,034,183) (7,810,307)

Increase (decrease) in:

Trade payables 2,306,212,978 2,131,482,177

Fringe benefits tax payable – (30,437,647)

Other current liabilities (12,046,954) (33,089,673)

Net cash generated from operations 2,461,290,797 2,431,469,859

Interest received 134,354,850 160,066,194

Dividends received 26,629 20,815

Income taxes paid (75,779,874) (57,979,264)

Net cash flows from operating activities 2,519,892,402 2,533,577,604

CASH FLOWS FROM INVESTING ACTIVITIES

Additions to long-term time deposits (Note 10) (200,000,000) –

Acquisition of property and equipment (Note 8) (37,844,514) (14,099,547)

Proceeds from disposal of property and equipment 7,144 1,076

Net cash flows used in investing activities (237,837,370) (14,098,471)

CASH FLOWS FROM FINANCING ACTIVITIES

Cash dividends declared and paid (Note 13) (237,500,000) (237,275,000)

Proceeds from issuance of shares (Note 13) 1,000,000 450,000

Net cash flows used in investing activities (236,500,000) (236,825,000)

NET INCREASE IN CASH AND CASH EQUIVALENTS 2,045,555,032 2,282,654,133

CASH AND CASH EQUIVALENTS AT BEGINNING

OF PERIOD 6,493,600,095 4,640,187,892

CASH AND CASH EQUIVALENTS AT END OF PERIOD (Note 4) P=8,539,155,127 P=6,922,842,025

See accompanying Notes to Consolidated Financial Statements.

17

COL FINANCIAL GROUP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate Information

COL Financial Group, Inc. (COL Financial, Parent Company) was registered with the Philippine

Securities and Exchange Commission (SEC) on August 16, 1999, primarily to engage in the business of

broker of securities and to provide stockbrokerage services through innovative internet technology.

COL Securities (HK) Limited (COLHK, Subsidiary), a wholly-owned foreign subsidiary, was

domiciled and incorporated in Hong Kong, primarily to act as stockbroker and invest in securities. In

the normal course of business, the Parent Company and COLHK (the Group) are also engaged in

providing financial advice, in the gathering and distribution of financial and investment information and

statistics and in acting as financial, commercial or business representative. The registered address of the

Parent Company is Unit 2401-B East Tower, PSE Centre, Exchange Road, Ortigas Center, Pasig City,

Philippines. The registered address of COLHK is Room 803, Luk Yu Building, 24-26 Stanley Street,

Hong Kong.

2. Basis of Preparation, Changes in Accounting Policies and Disclosures and Summary of Significant

Accounting Policies

Basis of Preparation The accompanying consolidated financial statements of the Group have been prepared in accordance with Philippine Financial Reporting Standards (PFRS). The consolidated financial statements have been prepared on a historical cost basis, except for financial assets at fair value (FVPL) which have been measured at fair value. The Group’s consolidated financial statements are presented in Philippine peso (PHP), which is the presentation currency under PFRS. Based on the economic substance of the underlying circumstances relevant to the Group, the functional currencies of the Parent Company and COLHK have been determined to be PHP and HK dollar (HK$), respectively. All values are rounded to the nearest peso, except when otherwise indicated.

Basis of Consolidation The consolidated financial statements include the accounts of the Parent Company and COLHK, a 100% owned and controlled foreign subsidiary, after eliminating significant intercompany balances and transactions.

Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:

Power over the investee (i.e., existing rights that give it the current ability to direct the relevant

activities of the investee);

Exposure, or rights, to variable returns from its involvement with the investee; and

The ability to use its power over the investee to affect the amount of the Parent Company’s returns.

Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

The contractual arrangement with the other vote holders of the investee;

Rights arising from other contractual arrangements; and

The Group’s voting rights and potential voting rights.

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins

18

when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control and until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it derecognizes the related assets (including goodwill),

liabilities, non-controlling interest and other components of equity while any resulting gain or loss is

recognized in profit or loss. Any investment retained is recognized at fair value.

Changes in Accounting Policies and Disclosures

The Group applied for the first time certain standards and amendments. Unless otherwise indicated,

these standards and amendments have no impact to the Group. Except for these standards and amended

PFRS which were adopted as of January 1, 2016, the accounting policies adopted are consistent with

those of the previous financial year.

PFRS 10, Consolidated Financial Statements and PAS 28, Investments in Associates and Joint

Ventures - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

PAS 27, Separate Financial Statements - Equity Method in Separate Financial Statements

PFRS 11, Joint Arrangements - Accounting for Acquisitions of Interests in Joint Operations

PAS 1, Presentation of Financial Statements - Disclosure Initiative (Amendments)

PFRS 14, Regulatory Deferral Accounts

PAS 16, Property, Plant and Equipment and PAS 41, Agriculture - Change in Financial Reporting

for Bearer Plants

PAS 16, Property, Plant and Equipment and PAS 38, Intangible Assets - Clarification of

Acceptable Methods of Depreciation and Amortization

Annual Improvements to PFRSs (2012 - 2014 cycle)

PFRS 5, Non-current Assets Held for Sale and Discontinued Operations - Changes in Methods

of Disposal

PFRS 7, Financial Instruments: Disclosures - Servicing Contracts

PFRS 7, Financial Instruments: Disclosures - Applicability of the Amendments to PFRS 7 to

Condensed Interim Financial Statements

PAS 19, Employee Benefits - Regional Market Issue regarding Discount Rate

PAS 34, Interim Financial Reporting - Disclosure of Information ‘Elsewhere in the Interim

Financial Report’

Standards and Interpretations Issued but not yet Effective

The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the

Group’s consolidated financial statements are disclosed below. The Group intends to adopt these

standards, if applicable, when they become effective. Adoption of these standards and interpretations

are not expected to have any significant impact on the consolidated financial statements of the Group

unless otherwise stated.

No definite adoption date prescribed by the SEC and Financial Reporting Standards Council (FRSC)

Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate

19

Effective January 1, 2018

PFRS 9, Financial Instruments (2014 or final version)

In July 2014, the IASB issued the final version of IFRS 9, Financial Instruments. The new standard

(renamed as PFRS 9) reflects all phases of the financial instruments project and replaces PAS 39,

Financial Instruments: Recognition and Measurement, and all previous versions of PFRS 9. The

standard introduces new requirements for classification and measurement, impairment, and hedge

accounting. PFRS 9 is effective for annual periods beginning on or after January 1, 2018, with

early application permitted. Retrospective application is required, but providing comparative

information is not compulsory. For hedge accounting, the requirements are generally applied

prospectively, with some limited exceptions. Early application is before February 1, 2015. The

Group did not early adopt PFRS 9.

The adoption of PFRS 9 will have an effect on the classification and measurements of the Group’s

financial assets and impairment methodology for financial assets, but will have no impact on the

classification and measurements of the Group’s financial liabilities. The Group is currently

assessing the impact of adopting this standard.

International Financial Reporting Standards (IFRS) 15, Revenue from Contracts with Customers

(effective January 1, 2018)

IFRS 15 which was issued in May 2014 by the IASB establishes a new five-step model that will

apply to revenue arising from contracts with customers. Under IFRS 15, revenue is recognized at

an amount that reflects the consideration to which an entity expects to be entitled in exchange for

transferring good or services to a customer. The principles on IFRS 15 provide a more structured

approach to measuring and recognizing revenue.

The new revenue standard is applicable to all entities and will supersede current revenue

recognition requirements under IFRS. Either a full or modified retrospective application is required

for annual periods beginning on or after January 1, 2018. Early adoption is permitted. The Group

is currently assessing the impact of IFRS 15 and plans to adopt the new standard in the required

effective date once adopted locally.

IFRS 16, Leases (effective January 1, 2019)

On January 13, 2016, the IASB issued its new standard, IFRS 16, Leases, which replaces IAS 17,

the current leases standard and the related Interpretations.

Under the new standard, lessees will no longer reclassify their leases as either operating or finance

leases in accordance with IAS 17. Rather, lessees will apply the single-asset model. Under this

model, lessees will recognize the assets and the related liabilities for most leases in their balance

sheets, and subsequently, will depreciate the lease assets and recognize interest on the lease

liabilities in their profit or loss. Leases with the term of twelve (12) months or less or for which the

underlying asset is of low value are exempted from these requirements.

The accounting by lessors is substantially unchanged as the new standards carried forward the

principles of lessor accounting under IAS 17. Lessors, however, will be required to disclose more

information in their financial statements, particularly on the risk exposure to residual value.

The new standard is effective for annual periods beginning on or after January 1, 2019. Entities may

early adopt IFRS 16 but only if they have also adopted IFRS 15, Revenue from Contracts with

Customers. When adopting IFRS 16, an entity is permitted to use either a full retrospective or a

modified retrospective approach, with options to use certain transition reliefs. The Group is

currently assessing the impact of IFRS 16 and plans to adopt the new standard on the required

20

effective date once adopted locally.

Summary of Significant Accounting Policies

Foreign Currency Translation Transactions in foreign currencies are initially recorded in the prevailing functional currency spot rate at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated at the closing functional currency rate of exchange at the reporting period. All differences are taken to the consolidated statement of income.

On consolidation, the assets and liabilities of the consolidated foreign subsidiary are translated into

Philippine Peso at the rate of exchange prevailing at the reporting date and their statements of profit or loss are translated at the average exchange rates for the year. The exchange differences arising on translation for consolidation are recognized in equity (under accumulated translation adjustment). Upon disposal of the foreign subsidiary, the component of OCI relating to the foreign subsidiary is recognized in the consolidated statement of income.

Current versus Non-current Classification The Group presents assets and liabilities in the consolidated statement of financial position based on current/non-current classification. An asset is current when it is: Expected to be realized or intended to be sold or consumed in a normal operating cycle; Held primarily for the purpose of trading; Expected to be realized within twelve (12) months after reporting period; or Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at

least twelve (12) months after the reporting period. All other assets are classified as non-current. A liability is current when:

It is expected to be settled in a normal operating cycle; It is held primarily for the purpose of trading; It is due to be settled within twelve months after the reporting period; or There is no unconditional right to defer the settlement of the liability for at least twelve (12)

months after the reporting period. The Group classifies all other liabilities as non-current. Deferred tax assets are classified as non-current assets.

Cash and Cash Equivalents Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash with original maturities of three (3) months or less from dates of acquisition and that are subject to insignificant risk of changes in value.

Cash in a Segregated Account Cash in a segregated account represents clients’ monies maintained by COLHK with a licensed bank arising from its normal course of business.

Financial Instruments - Initial Recognition and Subsequent Measurement Date of Recognition

Financial instruments are any contracts that give rise to a financial asset of one entity and a financial

liability or equity instrument of another entity. Financial instruments are recognized in the

consolidated statement of financial position when the Group becomes a party to the contractual

provisions of the instrument. Purchases or sales of financial assets that require delivery of assets

within the time frame established by regulation or convention in the marketplace are recognized on

the trade date.

21

Initial Recognition and Classification of Financial Instruments

All financial assets, including trading and investment securities and loans and receivables, are

initially measured at fair value. Except for financial assets at FVPL, the initial measurement

of financial assets includes transaction costs. The Group classifies its financial assets in the

following categories: financial assets at FVPL, held-to-maturity (HTM) investments, available-for-

sale (AFS) financial assets, and loans and receivables. The classification depends on the purpose

for which the financial instruments were acquired and whether they are quoted in an active market.

Management determines the classification of its financial instruments at initial recognition and,

where allowed and appropriate, re-evaluates such designation at each end of the reporting period.

The Group’s financial assets include financial assets at FVPL and loans and receivables. As at

September 30, 2016 and December 31, 2015, the Group has no HTM investments and AFS

financial assets.

All financial liabilities are recognized initially at fair value and in the case of loans and borrowings,

plus directly attributable transaction costs. Financial liabilities are classified as at FVPL or other

financial liabilities. The Group’s financial liabilities as at September 30, 2016 and

December 31, 2015 are in the nature of other financial liabilities.

Financial instruments are classified as liabilities or equity in accordance with the substance of the

contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument or a

component that is a financial liability are reported as expense or income. Distributions to holders of

financial instruments classified as equity are charged directly to equity net of any related income tax

benefits.

Financial Assets and Financial Liabilities at FVPL

Financial assets and financial liabilities at FVPL include financial assets and financial liabilities

held for trading purposes, financial assets and financial liabilities designated upon by management

at initial recognition as at FVPL, and derivative instruments (including bifurcated embedded

derivatives). Financial assets and financial liabilities are classified as held for trading if they are

acquired for the purpose of selling and repurchasing in the near term. Financial assets or financial

liabilities are designated as at FVPL on initial recognition when the following criteria are met:

The designation eliminates or significantly reduces the inconsistent treatment that would

otherwise arise from measuring the assets or liabilities or recognizing gains or losses on them

on a different basis; or

The assets and liabilities are part of a group of financial assets, financial liabilities or both

which are managed and their performance evaluated on a fair value basis, in accordance with a

documented risk management or investment strategy; or

The financial instrument contains an embedded derivative, unless the embedded derivative does

not significantly modify the cash flows or it is clear, with little or no analysis, that it would not

be separately recorded.

Financial assets and financial liabilities at FVPL are recorded in the consolidated statement of

financial position at fair value. Changes in fair value are recorded in ‘Trading gains - net’ in the

consolidated statement of income. Interest earned or incurred is recorded in interest income or

expense, respectively, while dividend income is recorded in other revenues according to the terms

of the contract, or when the right of the payment has been established.

As at September 30, 2016 and December 31, 2015, the Group has no financial assets and financial

liabilities that have been designated as at FVPL. As at September 30, 2016 and

December 31, 2015, the Group has financial assets which are held for trading purposes that are

classified as financial assets at FVPL.

22

Loans and Receivables These are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivables.

This accounting policy mainly relates to the consolidated statement of financial position captions ‘Cash and cash equivalents’, ‘Cash in a segregated account’, ‘Trade receivables’, ‘Other receivables’, refundable deposits and long-term time deposits under ‘Other noncurrent assets’, which arise primarily from service revenues and other types of receivables.

Receivables are recognized initially at fair value, which normally pertains to the billable amount. After initial measurement, loans and receivables are subsequently measured at amortized cost using the effective interest method, less allowance for credit losses. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees and costs that are an integral part of the effective interest rate (EIR). The amortization is included in ‘Interest income’ in the consolidated statement of income. The losses arising from impairment are recognized in ‘Provision for credit losses’ in the consolidated statement of income.

Other Financial Liabilities Issued financial instruments or their components, which are not designated as at FVPL are classified as other financial liabilities, where the substance of the contractual arrangement results in the Group having an obligation either to deliver cash or another financial asset to the holder, or to satisfy the obligation other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of own equity shares. The components of issued financial instruments that contain both liability and equity elements are accounted for separately, with the equity component being assigned the residual amount after deducting from the instrument as a whole the amount separately determined as the fair value of the liability component on the date of issue. After initial measurement, other financial liabilities are measured at amortized cost using the effective interest method. Amortized cost is calculated by taking into account any discount or premium on the issue and fees that are an integral part of the EIR. Any effects of restatement of foreign currency-denominated liabilities are recognized in ‘Foreign exchange gains - net’ account in the consolidated statement of income.

This accounting policy applies primarily to the consolidated statement of financial position captions ‘Trade payables’ and ‘Other current liabilities’ and other obligations that meet the above definition (other than the Group’s statutory liabilities).

Fair Value Measurement The Group measures financial instruments, such as financial assets at FVPL, at fair value at each end of the reporting period. Also, fair values of financial instruments measured at amortized cost are disclosed in Note 22.

Fair value is the estimated price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

In the principal market for the asset or liability, or

In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

23

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities

Level 2 - Valuation techniques for which the lowest level input that is significant to the fair

value measurement is directly or indirectly observable

Level 3 - Valuation techniques for which the lowest level input that is significant to the fair

value measurement is unobservable

For assets and liabilities that are recognized in the consolidated financial statements on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at each end of the reporting period.

The fair value of equity financial instruments that are actively traded in organized financial markets is determined by reference to quoted market close prices at the close of business of the reporting period.

For financial instruments where there is no active market, fair value is determined using valuation

techniques. Such techniques include comparison to similar investments for which market

observable prices exist and discounted cash flow analysis or other valuation models.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities

on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair

value hierarchy as explained above.

Trade Receivables and Payables

Trade receivables from customers, which include margin accounts, and payable to clearing house

and other brokers arise from securities purchased (in a regular way transaction) that have been

contracted for but not yet delivered and settled at the end of the reporting period. Payable to

customers and receivable from clearing house and other brokers arise from securities sold (in a

regular way transaction) that have been contracted for but not yet delivered and settled at the end of

the reporting period. Refer to the accounting policy for ‘Loans and receivables’ and ‘Other

financial liabilities’ for recognition and measurement. The related security valuation shows all

positions as of clearance date.

Derecognition of Financial Instruments

Financial Assets

A financial asset (or, where applicable a part of a financial asset or part of a group of similar

financial assets) is derecognized when:

The rights to receive cash flows from the asset have expired;

The Group retains the right to receive cash flows from the asset, but has assumed an obligation

to pay them in full without material delay to a third party under a ‘pass-through’ arrangement;

or

The Group has transferred its rights to receive cash flows from the asset and either (a) has

transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor

retained substantially all the risks and rewards of the asset, but has transferred control of the

asset.

24

When the Group has transferred its rights to receive cash flows from an asset and has neither

transferred nor retained substantially all the risks and rewards of the asset nor transferred control of

the asset, the asset is recognized to the extent of the Group’s continuing involvement in the asset.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at

the lower of the original carrying amount of the asset and the maximum amount of consideration

that the Group could be required to repay.

When the Group continues to recognize an asset to the extent of its continuing involvement, the

entity also recognizes an associated liability. Despite the other measurement requirements in PFRS,

the transferred asset and the associated liability are measured on a basis that reflects the rights and

obligations that the entity has retained. The associated liability is measured in such a way that the

net carrying amount of the transferred asset and the associated liability is:

a. the amortized cost of the rights and obligations retained by the entity, if the transferred asset

is measured at amortized cost; or

b. equal to the fair value of the rights and obligations retained by the entity when measured on

a stand-alone basis, if the transferred asset is measured at fair value.

The Group shall continue to recognize any income arising on the transferred asset to the extent of its

continuing involvement and shall recognize any expense incurred on the associated liability.

Financial Liabilities

A financial liability is derecognized when the obligation under the liability is discharged or

cancelled or has expired.

Where an existing financial liability is replaced by another from the same lender on substantially

different terms, or the terms of an existing liability are substantially modified, such exchange or

modification is treated as a derecognition of the original liability and the recognition of a new

liability, and the difference in the respective carrying amounts is recognized in the consolidated

statement of income.

Impairment of Financial Assets

The Group assesses at each end of the reporting period whether a financial asset or group of

financial assets is impaired. An impairment exists if one or more events that has occurred since the

initial recognition of the asset (an incurred ‘loss event’), has an impact on the estimated future cash

flows of the financial asset or the group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors is

experiencing significant financial difficulty, default or delinquency in interest or principal

payments, the probability that they will enter bankruptcy or other financial reorganization and

observable data indicating that there is a measurable decrease in the estimated future cash flows,

such as changes in arrears or economic conditions that correlate with defaults.

Financial Assets Carried at Amortized Cost

The Group assesses, at each end of the reporting period, whether objective evidence of impairment

exists individually for financial assets that are individually significant, and individually or

collectively for financial assets that are not individually significant. If it is determined that no

objective evidence of impairment exists for an individually assessed financial asset, whether

significant or not, the asset is included in a group of financial assets with similar credit risk

characteristics and that group of financial assets is collectively assessed for impairment. Assets that

are individually assessed for impairment and for which an impairment loss is or continues to be

recognized are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss on loans and receivables carried at amortized

cost has been incurred, the amount of the loss is measured as the difference between the asset’s

25

carrying amount and the present value of estimated future cash flows (excluding future credit losses

that have not been incurred) discounted at the financial asset’s original EIR (i.e., the EIR computed

at initial recognition). The carrying amount of the asset shall be reduced either directly or through

the use of an allowance account. The amount of the loss shall be recognized in the consolidated

statement of income.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be

related objectively to an event occurring after the impairment was recognized, the previously

recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is

recognized in the consolidated statement of income, to the extent that the carrying value of the asset

does not exceed its amortized cost at the reversal date.

In relation to receivables, a provision for credit losses is made when there is objective evidence

(such as the probability of insolvency or significant financial difficulties of the debtor) that the

Group will not be able to collect all of the amounts due under the original terms of the invoice. The

carrying amount of the receivable is reduced through the use of an allowance account. Impaired

debts are derecognized when they are assessed as uncollectible.

Offsetting of Financial Assets and Liabilities

Financial assets and liabilities are offset and the net amount is reported in the consolidated

statement of financial position if, and only if, there is a currently enforceable legal right to offset the

recognized amounts and the Group intends to either settle on a net basis, or to realize the asset and

the liability simultaneously.

Prepayments and Other Noncurrent Assets

The Group’s prepayments are composed of prepaid insurance, prepaid taxes, prepaid rent and other

prepayments. Other noncurrent assets are composed of long-term time deposits, deposit to CTGF,

refundable deposits and input VAT. These assets are classified as current when it is probable to be

realized within one (1) year from the end of the reporting period. Otherwise, these are classified as

noncurrent assets.

Property and Equipment

Property and equipment is stated at cost, excluding the costs of day-to-day servicing, less

accumulated depreciation and amortization and any accumulated impairment losses, if any. Such

cost includes the cost of replacing part of such property and equipment, if the recognition criteria

are met.

The initial cost of property and equipment comprises its purchase price, including import duties,

non-refundable taxes and any directly attributable costs of bringing the asset to its working

condition and location for its intended use. Expenditures incurred after the property and equipment

have been put into operations, such as repairs and maintenance, are normally charged against

income in the period when the costs are incurred. In situations where it can be clearly demonstrated

that the expenditures have resulted in an increase in the future economic benefits expected to be

obtained from the use of an item of property and equipment beyond its originally assessed standard

of performance, the expenditures are capitalized as additional costs of property and equipment.

Each part of an item of property and equipment with a cost that is significant in relation to the total

cost of the item is depreciated separately.

26

Depreciation and amortization is computed on the straight-line basis over the following estimated

useful lives of the assets:

Category Number of Years

Online trading equipment and facilities 3-10

Furniture, fixtures and equipment 3-10

Leasehold improvements

5 or term of lease,

whichever is shorter

The carrying values of property and equipment are reviewed for impairment when events or

changes in circumstances indicate that the carrying value may not be recoverable.

An item of property and equipment is derecognized upon disposal or when no future economic

benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset

(calculated as the difference between the net disposal proceeds and the carrying amount of the asset)

is included in the consolidated statement of income in the year the asset is derecognized. The

asset’s residual values, if any, useful lives and methods are reviewed and adjusted if appropriate, at

each end of the reporting period.

Software cost

Costs related to software purchased by the Group for use in operations are included in the

‘Property and equipment’ account and are amortized on a straight-line basis over the estimated life

of three (3) to ten (10) years.

Intangibles

Intangibles are composed of exchange trading rights, which are carried at cost less any allowance

for impairment losses. Exchange trading rights are reviewed for impairment annually or more

frequently if events or changes in circumstances indicate that the carrying values may be impaired.

The exchange trading rights are deemed to have indefinite useful lives as there is no foreseeable

limit to the period over which the asset is expected to generate net cash inflows for the Group. The

assessment of indefinite life is reviewed annually to determine whether the indefinite useful life

continues to be supportable. If not, the change in useful life from indefinite to finite is made on a

prospective basis. The Parent Company does not intend to sell its exchange trading right in the near

future. COLHK’s exchange trading right is a nontransferable right.

Impairment of Non-Financial Assets

The Group assesses at each end of the reporting period whether there is an indication that its

prepayments, property and equipment, intangibles and other noncurrent assets may be impaired. If

any such indication exists or when the annual impairment testing for an asset is required, the Group

makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher

of the asset’s value-in-use (VIU) or its fair value less costs to sell. The fair value less costs to sell is

the amount obtainable from the sale of an asset at an arm’s-length transaction, while VIU is the

present value of estimated future cash flows expected to arise from the continuing use of an asset

and from its disposal at the end of its useful life. Where the carrying amount of an asset exceeds its

recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

An impairment loss is recognized by a charge against current operations for the excess of the

carrying amount of an asset over its recoverable amount in the year in which it arises.

A previously recognized impairment loss is reversed by a credit to current operations to the extent

that it does not restate the asset to a carrying amount in excess of what would have been determined

(net of any accumulated depreciation and amortization) had no impairment loss been recognized for

the asset in prior years.

27

Leases

The determination of whether an arrangement is, or contains a lease is based on the substance

of the arrangement and requires an assessment of whether the fulfillment of the arrangement is

dependent on the use of a specific asset or assets and the arrangement conveys a right to use the

asset. A reassessment is made after inception of the lease only if one of the following applies:

(a) There is a change in contractual terms, other than a renewal or extension of the arrangement;

(b) A renewal option is exercised or extension granted, unless that term of the renewal or

extension was initially included in the lease term;

(c) There is a change in the determination of whether fulfillment is dependent on a specified asset;

or

(d) There is a substantial change to the asset.

Where a reassessment is made, lease accounting shall commence or cease from the date when the

change in circumstances gave rise to the reassessment for scenarios (a), (c) or (d) above, and at the

date of renewal or extension period for scenario (b).

Group as a Lessee

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are

classified as operating leases. Operating lease payments are recognized as an expense in the

consolidated statement of income on a straight-line basis over the lease term.

Provisions

Provisions are recognized when the Group has a present obligation (legal or constructive) as a result

of a past event, it is probable that an outflow of resources embodying economic benefits will be

required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

If the effect of the time value of money is material, provisions are made by discounting the expected

future cash flows at a pre-tax rate that reflects current market assessments of the time value of

money and, where appropriate, the risks specific to the liability. Where discounting is used, the

increase in the provision due to the passage of time is recognized as an interest expense.

Where the Group expects some or all of a provision to be reimbursed, the reimbursement is

recognized as a separate asset but only when the reimbursement is virtually certain. The expense

relating to any provision is presented in the consolidated statement of income, net of any

reimbursement.

Capital Stock and Capital in Excess of Par Value

The Parent Company has issued capital stock that is classified as equity. Incremental costs directly

attributable to the issue of new capital stock are shown in equity as a deduction, net of any related

tax benefit, from the proceeds.

Where the Group purchases the Parent Company’s capital stock (treasury shares), the consideration

paid, including any directly attributable incremental costs (net of applicable taxes) is deducted from

equity attributable to the Parent Company’s stockholders until the shares are cancelled or reissued.

Where such shares are subsequently reissued, any consideration received, net of any directly

attributable incremental transaction costs and the related tax effects, is included in equity.

Amount of contribution in excess of par value is accounted for as a capital in excess of par value.

Capital in excess of par value also arises from additional capital contribution from the stockholders.

Retained Earnings

Retained earnings are accumulated profits realized out of normal and continuous operations of the

business after deducting therefrom distributions to stockholders and transfers to capital or other

accounts. Cash and stock dividends are recognized as a liability and a deduction from equity when

they are approved by the Group’s BOD and stockholders, respectively. Dividends for the year that

28

are approved after the end of the reporting period are dealt with as an event after the end of the

reporting period.

Retained earnings may also include effect of changes in accounting policy as may be required by

the standard’s transitional provisions.

Unappropriated retained earnings represent that portion which is free and can be declared as

dividends to stockholders. Appropriated retained earnings represent that portion which has been

restricted and, therefore, not available for dividend declaration.

Cash Dividend

The Group recognizes a liability to make cash distributions to equity holders of the parent when

distribution is authorized and the distribution is no longer at the discretion of the Group. A

corresponding amount is recognized in equity.

Revenue Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the

Group and the revenue can be reliably measured, regardless of when the payment is being made.

Revenue is measured at the fair value of the consideration received or receivable, taking into

account contractually defined terms of payment and excluding taxes or duty. The Group has

concluded that it is the principal in all of its revenue arrangements except for its brokerage

transactions. The following specific recognition criteria must also be met before revenue is

recognized:

Commissions

Commissions are recognized as income upon confirmation of trade deals. These are computed for

every trade transaction based on a flat rate or a percentage of the amount of trading transaction

whichever is higher.

Interest

Interest income is recognized as it accrues taking into account the effective yield of the asset.

Dividend

Dividend income is recognized when the right to receive payment is established, which is the date

of declaration.

Other Income

Revenue is recognized in the consolidated statement of income as they are earned.

Cost and Expenses

Cost and expenses are decreases in economic benefits during the accounting period in the form of

outflows or decrease of assets or incurrence of liabilities that result in decreases in equity, other than

those relating to distributions to equity participants. Cost and expenses are recognized when the

related revenue is earned or when the service is rendered. The majority of cost and expenses

incurred by the Group such as commissions, personnel costs, professional fees, and computer

services, are overhead in nature and are recognized with regularity as the Group continues its

operations.

Share-Based Payment Transactions

Certain employees (including senior executives) of the Group receive remuneration in the form of

share-based payment transactions, whereby employees render services in exchange for shares or

rights over shares (‘equity-settled transactions’).

The cost of equity-settled transactions with employees is measured by reference to the fair value

at the date at which they are granted. In valuing equity-settled transactions, vesting conditions,

29

including performance conditions, other than market conditions (conditions linked to share prices),

shall not be taken into account when estimating the fair value of the shares or share options at the

measurement date. Instead, vesting conditions are taken into account in estimating the number of

equity instruments that will vest. The fair value is determined using an appropriate pricing model,

further details of which are given in Note 16 to the notes to consolidated financial statements.

The cost of equity-settled transactions is recognized in the consolidated statement of income,

together with a corresponding increase in equity, over the period in which service conditions are

fulfilled, ending on the date on which relevant employees become fully entitled to the award

(vesting date). The cumulative expense recognized for equity-settled transactions at each end of the

reporting period until the vesting date reflects the extent to which the vesting period has expired and

the number of awards, based on the best available estimate of number of equity instruments in the

opinion of the management of the Group, will ultimately vest.

No expense is recognized for awards that do not ultimately vest, except for awards where vesting is

conditional upon a market condition, which are treated as vesting irrespective of whether or not the

market condition is satisfied, provided that all other performance conditions are satisfied.

Where the terms of an equity-settled award are modified, as a minimum, expense is recognized as if

the terms had not been modified. In addition, an expense is recognized for any increase in the value

of the transaction as a result of the modification, measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of

cancellation, and any expense not yet recognized for the award is recognized immediately.

However, if a new award is substituted for the cancelled award, and designated as a replacement

award on the date that it is granted, the cancelled and new awards are treated as if they were a

modification of the original award, as described in the previous paragraph.

The Group has applied PFRS 2, only to equity-settled awards granted after November 7, 2002

that had not vested on or before January 1, 2005.

Prior to January 1, 2005, the Group did not recognize any expense for share options granted but

disclosed required information for such options (Note 16). The Group recognizes capital stock

upon the exercise of the stock options.

The dilutive effect of outstanding stock options is reflected as additional share dilution in the

computation of diluted earnings per share (EPS) (Note 24).

Retirement Costs

The Parent Company has a noncontributory defined benefit retirement plan.

The net defined benefit liability or asset is the aggregate of the present value of the defined benefit

obligation at the end of the reporting period reduced by the fair value of plan assets (if any),

adjusted for any effect of limiting a net defined benefit asset to the asset ceiling. The asset ceiling is

the present value of any economic benefits available in the form of refunds from the plan or

reductions in future contributions to the plan.

The cost of providing benefits under the defined benefit plans is actuarially determined using the

projected unit credit method. This method reflects service rendered by employees to the date of

valuation and incorporates assumptions concerning the employees’ projected salaries.

Defined benefit costs comprise the following:

Service cost

Net interest on the net defined benefit liability or asset

Remeasurements of net defined benefit liability or asset

30

Service costs which include current service cost, past service costs and gains or losses on non-

routine settlements are recognized as ‘Retirement costs’ under ‘Personnel costs’ in the consolidated

statement of income. Past service costs are recognized when plan amendment or curtailment

occurs.

Net interest on the net defined benefit liability or asset is the change during the period in the net

defined benefit liability or asset that arises from the passage of time which is determined by

applying the discount rate based on government bonds to the net defined benefit liability or asset.

Net interest on the net defined benefit liability or asset is recognized as ‘Interest expense’ in the

consolidated statement of income.

Remeasurements comprising actuarial gains and losses, return on plan assets and any change in the

effect of the asset ceiling (excluding net interest on defined benefit liability) are recognized

immediately in OCI in the period in which they arise. Remeasurements are not reclassified to the

consolidated statement of income in subsequent periods. Remeasurements recognized in OCI after

the initial adoption of the Revised PAS 19 are retained in OCI which is presented as ‘Gain (loss) on

remeasurement of retirement obligation’ under equity.

Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurance

policies. Plan assets are not available to the creditors of the Group, nor can they be paid directly to

the Group. Fair value of plan assets is based on market price information. When no market price is

available, the fair value of plan assets is estimated by discounting expected future cash flows using

a discount rate that reflects both the risk associated with the plan assets and the maturity or expected

disposal date of those assets (or, if they have no maturity, the expected period until the settlement of

the related obligations). If the fair value of the plan assets is higher than the present value of the

defined benefit obligation, the measurement of the resulting defined benefit asset is limited to the

present value of economic benefits available in the form of refunds from the plan or reductions in

future contributions to the plan.

The Group’s right to be reimbursed of some or all of the expenditure required to settle a defined

benefit obligation is recognized as a separate asset at fair value when and only when reimbursement

is virtually certain.

The retirement plan of COLHK is a defined contribution retirement plan. Under a defined

contribution retirement plan, the entity’s legal and constructive obligation is limited to the amount

that it agrees to contribute to the fund. Thus, the amount of the post-employment benefits received

by the employee is determined by the amount of contributions paid by an entity to a post-

employment benefit plan, together with investment returns arising from the contributions.

Consequently, actuarial risk (that benefits will be less than expected) and investment risk (that

assets invested will be sufficient to meet expected benefits) fall on the employee.

The standard requires an entity to recognize short-term employee benefits when an employee has

rendered service in exchange of those benefits.

EPS

Basic EPS is computed by dividing earnings applicable to common stock by the weighted average

number of common shares outstanding, after giving retroactive effect for any stock dividends, stock

splits or reverse stock splits during the year.

Diluted EPS is computed by dividing net income by the weighted average number of common

shares outstanding during the year, after giving retroactive effect for any stock dividends, stock

splits or reverse stock splits during the year, and adjusted for the effect of dilutive options.

Outstanding stock options will have a dilutive effect under the treasury stock method only when the

average market price of the underlying common share during the period exceeds the exercise price

of the option. Where the effect of the exercise of all outstanding options has anti-dilutive effect,

31

basic and diluted EPS are stated at the same amount.

Taxes

Current Income Tax

Current income tax assets and liabilities are measured at the amount expected to be recovered from

or paid to the taxation authorities. The income tax rates and income tax laws used to compute the

amount are those that are enacted or substantively enacted at the end of the reporting period in the

countries where the Group operates and generates taxable income.

Deferred Income Tax

Deferred income tax is provided, using the balance sheet liability method, on all temporary

differences at the end of the reporting period between the tax bases of assets and liabilities and their

carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognized for all taxable temporary differences. With respect to

investments in foreign subsidiaries, deferred income tax liabilities are recognized except where the

timing of the reversal of the temporary difference can be controlled and it is probable that the

temporary difference will not reverse in the foreseeable future.

Deferred income tax assets are recognized for all deductible temporary differences including net

loss carry-over to the extent that it is probable that sufficient future taxable income will be available

against which the deductible temporary differences can be utilized. Deferred income tax, however,

is not recognized on temporary differences that arise from the initial recognition of an asset or

liability in a transaction that is not a business combination and, at the time of the transaction, affects

neither the accounting income nor the taxable income or loss.

The carrying amount of deferred income tax assets is reviewed at each end of the reporting period

and reduced to the extent that it is no longer probable that sufficient future taxable income will be

available to allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred

income tax assets are reassessed at each end of the reporting period and are recognized to the extent

that it has become probable that future taxable income will allow the deferred income tax asset to be

recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are applicable to the

period when the asset is realized or the liability is settled, based on income tax rates and income tax

laws that have been enacted or substantively enacted at the end of the reporting period.

Deferred income tax relating to items recognized directly in equity is also recognized in equity.

Deferred income tax items are recognized in correlation to the underlying transaction either in OCI

or directly in equity.

Deferred income tax assets and deferred income tax liabilities are offset if a legally enforceable

right exists to offset current income tax assets against current income tax liabilities and deferred

income taxes related to the same taxable entity and the same taxation authority.

Input Value-added Taxes (VAT)

Input VAT represents VAT imposed on the Parent Company by its suppliers and contractors for the

acquisition of goods and services required under Philippine taxation laws and regulations.

Input VAT is stated at its estimated net realizable values.

Contingencies

Contingent liabilities are not recognized in the consolidated financial statements. These are

disclosed unless the possibility of an outflow of resources embodying economic benefits is remote.

Contingent assets are not recognized in the consolidated financial statements but are disclosed when

32

an inflow of economic benefits is probable.

Segment Reporting

The Group’s operating businesses are organized and managed separately according to the

geographical location of its operations, with each segment representing a unit that offers

stockbrokerage services and serves different markets. Financial information on geographical

segments is presented in Note 25. The Group operates in one business segment, being

stockbrokerage services; therefore, business segment information is no longer presented.

Events After the End of the Reporting Period

Post year-end events that provide additional information about the Group’s position at the end of

the reporting period (adjusting events) are reflected in the consolidated financial statements. Post

year-end events that are not adjusting events are disclosed when material.

3. Significant Accounting Judgments, Estimates and Assumptions

The preparation of the consolidated financial statements in accordance with PFRS requires the Group to

make judgments and estimates that affect the reported amounts of assets, liabilities, income and

expenses and disclosure of contingent assets and contingent liabilities. Future events may occur which

will cause the judgments and assumptions used in arriving at the estimates to change. The effects of

any change in judgments and estimates are reflected in the consolidated financial statements as they

become reasonably determinable.

Judgments and estimates and assumptions are continually evaluated and are based on historical

experience and other factors, including expectations of future events that are believed to be reasonable

under the circumstances. However, actual outcome can differ from these estimates.

Judgments

In the process of applying the Group’s accounting policies, management has made the following

judgments, apart from those involving estimations, which have the most significant effect on the

amounts recognized in the consolidated financial statements:

Determining Functional Currency

Based on the economic substance of the underlying circumstances relevant to the Group, the functional

currencies of the Parent Company and COLHK have been determined to be PHP and HK$, respectively.

PHP and the HK$ are the currencies of the primary economic environments in which the Parent

Company and COLHK, respectively, operate. They are the currencies that mainly influence the revenue

and expenses of the Parent Company and COLHK.

Assessing Whether an Agreement is a Finance or Operating Lease

Management assesses at the inception of the lease whether an arrangement is a finance or operating

lease based on who bears substantially all risk and benefits incidental to the ownership of the leased

item. Based on management’s assessment, the risk and rewards of owning the items leased by the

Group are retained by the lessor and therefore accounts for as operating lease.

Operating Lease Commitments - Group as a Lessee

The Group has entered into commercial property leases on its facility and administrative office

locations. The Group has determined that these are operating leases since they do not retain all the

significant risks and rewards of ownership of these properties.

Classifying Financial Assets at FVPL

The Group classifies financial assets that are held for trading as financial assets at FVPL. These

financial assets are held for the purpose of selling in the short-term. Details of financial assets at FVPL

are disclosed in Note 6.

33

Estimates and Assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of

the reporting period, that have a significant risk of causing a material adjustment to the carrying

amounts of assets and liabilities within the next reporting period are discussed below.

Estimating Impairment of Trade Receivables and Other Receivables

The Group reviews its receivables at each end of the reporting period to assess whether provision for

credit losses should be recorded in the consolidated statement of income. In particular, judgment by

management is required in the estimation of the amount and timing of future cash flows when

determining the level of allowance required. The Group individually assesses receivables when the

value of the collateral falls below the management-set level. When no payment is received within a

specified timeframe, the outstanding balance is deemed impaired. Collective assessment is based on the

age of the financial assets and historical expected losses adjusted for current conditions.

As at September 30, 2016 and December 31, 2015, the carrying amounts of trade receivables and other

receivables and the allowance for credit losses on trade receivables and other receivables are disclosed

in Note 7.

Estimating Useful Lives of Property and Equipment

The Group estimates the useful lives of its property and equipment based on the period over which the

assets are expected to be available for use. The Group reviews annually the estimated useful lives of

property and equipment based on factors that include asset utilization, internal technical evaluation,

technological changes, environmental and anticipated use of the assets tempered by related industry

benchmark information. It is possible that future results of operations could be materially affected by

changes in the Group’s estimates brought about by changes in the factors mentioned. There are no

changes in useful lives as at September 30, 2016 and December 31, 2015. The net book values of

property and equipment are disclosed in Note 8.

Assessing Impairment of Prepayments, Property and Equipment and Other Noncurrent Assets

The Group assesses impairment on prepayments, property and equipment and other noncurrent assets

whenever events or changes in circumstances indicate that the carrying amount of an asset may not be

recoverable.

The factors that the Group considers important which could trigger an impairment review include the

following:

Significant underperformance relative to expected historical or projected future operating results;

Significant changes in the manner of use of the acquired assets or the strategy for overall business;

and

Significant negative industry or economic trends.

An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable

amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and VIU. The

fair value less costs to sell is the amount obtainable from the sale of an asset in an arm’s-length

transaction less the costs of disposal while VIU is the present value of estimated future cash flows

expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.

In determining the present value of estimated future cash flows expected to be generated from the

continued use of the assets, the Group is required to make estimates and assumptions that can materially

affect the consolidated financial statements.

Based on management’s assessment, there are no indications of impairment on the Group’s

prepayments and property and equipment as at September 30, 2016 and December 31, 2015.

No impairment loss was recognized as of September 30, 2016 and December 31, 2015 for prepayments,

34

property and equipment and other noncurrent assets.

As at September 30, 2016 and December 31, 2015, the Group has allowance for impairment losses on

other noncurrent assets. The net book values of property and equipment and other noncurrent assets are

disclosed in Notes 8 and 10, respectively.

Determining Useful Lives and Impairment of the Intangibles

Intangibles include exchange trading rights, which are carried at cost less any allowance for impairment

loss. Exchange trading rights are reviewed for impairment annually or more frequently if events or

changes in circumstances indicate that the carrying values may be impaired. The exchange trading

rights are deemed to have indefinite useful lives as there is no foreseeable limit to the period over which

the asset is expected to generate net cash inflows for the Group.

The management’s impairment test for the Parent Company’s exchange trading right is based on the

available market value while COLHK’s exchange trading right is based on VIU calculation that uses a

discounted cash flow model. The cash flows are derived from the budget for the next five (5) years.

The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model

as well as the expected future cash inflows and the growth rate used.

The key assumptions used to determine the recoverable amount of the Group’s exchange trading rights

are further explained in Note 9. The Parent Company does not intend to sell its exchange trading right

in the near future. COLHK’s right is nontransferable with an indefinite useful life. As at

September 30, 2016 and December 31, 2015, the carrying values of intangibles are disclosed in Note 9.

Estimating Recoverability of Deferred Income Tax Assets

The Group reviews the carrying amounts of deferred income tax assets at each end of the reporting

period and reduces deferred income tax assets to the extent that it is no longer probable that sufficient

future taxable income will be available to allow all or part of the deferred income tax assets to be

utilized. The deferred income tax assets as at September 30, 2016 and December 31, 2015, are

disclosed in Note 17.

Estimating Contingencies

The Group evaluates legal and administrative proceedings to which it is involved based on analysis of

potential results. Management and its legal counsels do not believe that any current proceedings will

have material adverse effects on its financial position and results of operations. It is possible, however,

that future results of operations could be materially affected by changes in the estimates or in the

effectiveness of strategies relating to these proceedings (Note 23).

Determining Share-Based Payment

The Group measures the cost of equity-settled transactions with employees by reference to the fair value

of the equity instruments at the date at which they are granted. Estimating fair value for share-based

payment requires determining the most appropriate valuation model for a grant of equity instruments,

which is dependent on the terms and conditions of the grant. This also requires determining the most

appropriate inputs to the valuation model including the expected life of the option, volatility and

dividend yield and making assumptions about them. The assumptions and models used for estimating

fair value for share-based payment are disclosed in Note 16.

Determining Retirement Obligation

The costs of defined retirement obligation as well as the present value of the defined benefit obligation

are determined using actuarial valuations. The actuarial valuation involves making various

assumptions. These include the determination of the discount rates, future salary increases, mortality

rates and future retirement increases. Due to the complexity of the valuation, the underlying

assumptions and its long-term nature, defined benefit obligation are highly sensitive to changes in these

assumptions. All assumptions are reviewed at each end of the reporting period.

35

In determining the appropriate discount rate, management considers the interest rates of government

bonds that are denominated in the currency in which the benefits will be paid, with extrapolated

maturities corresponding to the expected duration of the defined benefit obligation.

Further details about the assumptions used are provided in Note 16.

Determining Fair Values of Financial Instruments

When the fair values of financial assets and financial liabilities recorded in the consolidated statement

of financial position cannot be measured based on quoted prices in active markets, their fair value is

measured using valuation techniques including the discounted cash flow (DCF) model. The inputs to

these models are taken from observable markets where possible, but where this is not feasible, a degree

of judgment is required in establishing fair values. Judgments include considerations of inputs such as

liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the

reported fair value of financial instruments (Note 22).

4. Cash and Cash Equivalents

September 30, 2016

(Unaudited)

December 31,2015

(Audited)

Cash on hand and in banks P=993,396,159 P=466,769,391

Short-term cash investments 7,545,758,968 6,026,830,704

P=8,539,155,127 P=6,493,600,095

Cash in banks earn interest at the respective bank deposit rates. Short-term cash investments are made

for varying periods depending on the Group’s immediate cash requirements, and earn interest at 0.7% to

2.2% per annum in 2016 and 2015. Interest income from banks of the Group amounted to

P=118,840,976 and P=78,039,343 in September 30, 2016 and 2015, respectively (see Note 14). The

Parent Company has U.S. dollar-denominated cash in banks as of September 30, 2016 and December

31, 2015 (see Note 21).

In compliance with SRC Rule 49.2 covering customer protection and custody of securities, the Parent

Company maintains special reserve bank accounts for the exclusive benefit of its customers amounting

to P=8,288,686,718 and P=6,194,973,419 as at September 30, 2016 and December 31, 2015, respectively.

The Parent Company’s reserve requirement is determined based on the SEC’s prescribed computations.

As at September 30, 2016 and December 31, 2015, the Parent Company’s reserve accounts are adequate

to cover its reserve requirements.

5. Cash in a Segregated Account

COLHK receives and holds money deposited by clients in the course of the conduct of the regulated

activities of its ordinary business. These clients’ monies are maintained with a licensed bank. The

Group has classified the clients’ monies under current assets in the consolidated statement of financial

position and recognized a corresponding payable to customers on grounds that it is liable for any loss or

misappropriation of clients’ monies. The Group is not allowed to use the clients’ monies to settle its

own obligations.

As of September 30, 2016 and December 31, 2015, cash in a segregated account for COLHK amounted

to P=195,649,529 and P=255,596,013, respectively.

36

6. Financial Assets at FVPL

Financial assets at FVPL pertain to investments in mutual funds and shares of stocks of companies

listed in the PSE. The Group recognized from fair value changes of these financial instruments a (loss)

gain of (P=293,928) and P=10,968,644 in September 30, 2016 and 2015, respectively. Dividend income

included under other revenues amounted to P=26,629 and P=20,815 in September 30, 2016 and 2015,

respectively.

Financial assets at FVPL as at September 30, 2016 and December 31, 2015 amounted to P=2,083,488

and P=1,673,427, respectively.

7. Trade and Other Receivables

The Parent Company has a credit line facility (involving margin accounts) for qualified customers with

the outstanding balance subject to an interest rate ranging from 0.7% to 1.5% per month. Total credit

line offered by the Parent Company amounted to P= 5,096,506,000 and P=5,118,001,000 as of

September 30, 2016 and December 31, 2015, respectively. Interest income from customers amounted

to P=45,662,368 and P=99,557,653 in September 30, 2016 and 2015, respectively (see Note 14).

September 30, 2016

(Unaudited)

December 31,2015

(Audited)

Trade receivables:

Customers P=1,115,816,477 P=846,028,233

Clearing house 38,860,437 96,016,120

Other brokers 97,426,693 134,806,639

Trail fee 586,271 –

Subscription receivables – 233,064

1,252,689,878 1,077,084,056

Less allowance for credit losses on receivable

from customers 2,836,973 1,274,357

P=1,249,852,905 P=1,075,809,699

Other receivables:

Accrued interest P=13,435,570 P=6,874,758

Advances to officers and employees 717,474 372,055

Others 12,315,933 10,138,609

26,468,977 17,385,422

Less allowance for credit losses on other receivables 8,960,245 8,960,245

P=17,508,732 P=8,425,177

37

The Group’s trade receivables from customers and its security valuation follow:

September 30, 2016

(Unaudited)

December 31, 2015

(Audited)

Money Balance Security Valuation Money Balance Security Valuation

Cash and fully secured accounts:

More than 250% P=442,582,897 P=3,506,973,256 P=341,152,360 P=2,908,670,462

Between 200% and 250% 283,152,690 612,006,346 70,434,578 157,862,011

Between 150% and 200% 29,672,787 57,534,023 243,478,049 437,812,936

Between 100% and 150% 253,312,432 302,750,865 106,850,738 115,301,775

Less than 100% 100,933,554 94,072,955 84,112,493 80,447,392

Unsecured accounts 6,162,117 – 15 –

1,115,816,477 4,573,337,445 846,028,233 3,700,094,576

Less allowance for credit losses on

receivable from customers 2,836,973 – 1,274,357 –

P=1,112,979,504 P=4,573,337,445 P=844,753,876 P=3,700,094,576

Trade receivables from margin customers have no specific credit terms but customers are required to

maintain the value of their collateral within a specific level. Once the value of the collateral falls down

this level, customers may either deposit additional collateral or sell stock to cover their account balance.

Meanwhile, receivables from post-paid customers are required to be settled on two (2) trading days’

term for COLHK and three (3) trading days’ term for the Parent Company. The receivable balances

become demandable upon failure of the customer to duly comply with these requirements. As at

September 30, 2016 and December 31, 2015, P=1,008,720,806 and P=761,915,725, respectively, of the

total trade receivables from customers are fully covered by collateral.

Trade receivables from clearing house as at September 30, 2016 and December 31, 2015 were fully

collected subsequently in October and January 2016, respectively. These are noninterest-bearing and

are collected on two (2) trading days’ term and three (3) trading days’ term following the settlement

convention of HK and Philippines clearing houses, respectively.

Receivables from other brokers pertain to client monies deposited to Interactive Brokers (IB) LLC

through COLHK. In March 2014, COLHK opened an account with the said broker to enable retail

customers to trade in other foreign markets.

Included in ‘Others’ account as at September 30, 2016 and December 31, 2015 are lodgment fees and

advances to legal counsels and the amount of P=8,960,245 representing additional corporate income tax

paid under protest by the Parent Company for the taxable year 2009 which was fully provided with

allowance for impairment losses. For the first, second and third quarters of the taxable year 2009, the

Parent Company used the itemized method of deduction in determining its income tax payable for the

same period. In its final adjusted income tax return, it opted to use the forty percent (40%) optional

standard deduction (OSD) to determine the final income tax payable for 2009, pursuant to Republic Act

No. 9504 effective July 7, 2008, as implemented by Revenue Regulations (RR) No. 16-08 dated

November 26, 2008. However on March 14, 2010, RR No. 2-2010 became effective and amended

Section 7 of RR No. 16-08, which required taxpayers to signify the election to claim either the OSD or

itemized deduction during the filing of the first quarter income tax return which must be consistently

applied for all succeeding quarterly returns and in the final income tax returns for the taxable year.

Likewise, Revenue Memorandum Circular (RMC) No. 16-2010 was issued on February 26, 2010,

giving retroactive application to RR No. 2-2010.

The additional income tax paid under protest is for the sole purpose of avoiding any interest or penalty

which may be subsequently imposed in erroneously applying RR No. 2-2010 and RMC No. 16-2010

retroactively in violation of Section 246 of the 1997 Tax Code, as amended. Payment of the additional

income tax does not constitute an admission of any deficiency tax liability for the taxable year 2009 nor

shall the same be construed as a waiver of the right to apply for and secure a refund of the tax erroneously

paid for the period. Hence, on April 3, 2012, the Parent Company filed with the Court of Tax Appeals

38

(CTA) a Petition for Review asking the CTA to require the Bureau of Internal Revenue (BIR) to refund or

issue a Tax Credit Certificate (TCC) for the aforementioned amount representing excess income tax paid for

taxable year 2009. On April 21, 2014, a decision was issued by the CTA ordering the BIR to issue a TCC

in favor of the Parent Company amounting to P=8,960,245. On December 15, 2015, the CTA En Banc

denied the motion for reconsideration filed by the Commissioner of Internal Revenue (CIR). On April 6,

2016, the Supreme Court (SC) Third Division likewise denied the CIR’s petition for review on certiorari.

On August 1, 2016, the SC Third Division issued a decision denying with finality the CIR’s motion for

reconsideration, effectively affirming the Decision of the Court of Tax Appeals Third Division ordering the

CIR to issue a tax credit certificate in favor of the Parent Company in the amount of P=8,960,245.

Pending the actual receipt of the tax credit certificate from the BIR, no reversal of allowance for impairment

losses was made.

Movements in the allowance for credit losses follow:

September 30, 2016

(Unaudited)

December 31, 2015

(Audited)

Customers Others Total Customers Others Total

Balances at beginning of period P=1,274,357 P=8,960,245 P=10,234,602 P=3,410,234 P=8,960,245 P=12,370,479

Provisions for (recovery from) credit

losses 1,562,616 – 1,562,616 (2,135,877) – (2,135,877)

Balances at end of period P=2,836,973 P=8,960,245 P=11,797,218 P=1,274,357 P=8,960,245 P=10,234,602

8. Property and Equipment

September 30, 2016 (Unaudited)

Online Trading

Equipment and

Facilities

Furniture,

Fixtures and

Equipment

Leasehold

Improvements Total

Cost:

At beginning of the period P=110,941,161 P=30,122,088 P=28,009,979 P=169,073,228

Additions 36,800,625 730,208 313,681 37,844,514

Disposals – (50,000) – (50,000)

Translation adjustments 163,549 218,277 19,522 401,348

At end of the period 147,905,335 31,020,573 28,343,182 207,269,090

Accumulated depreciation and

amortization:

At beginning of the period 74,541,138 25,457,626 24,806,052 124,804,816

Depreciation and amortization 9,846,908 1,905,398 1,621,104 13,373,410

Disposals – (47,222) – (47,222)

Translation adjustments 163,549 208,614 19,522 391,685

At end of the period 84,551,595 27,524,416 26,446,678 138,522,689

Net book value P=63,353,740 P=3,496,157 P=1,896,504 P=68,746,401

39

December 31, 2015 (Audited)

Online Trading

Equipment and

Facilities

Furniture,

Fixtures and

Equipment

Leasehold

Improvements Total

Cost

At beginning of year P=92,214,633 P=26,804,789 P=26,292,911 P=145,312,333

Additions 21,545,134 2,899,338 1,668,864 26,113,336

Disposals (3,222,443) (94,063) – (3,316,506)

Translation adjustments 403,837 512,024 48,204 964,065

At end of year 110,941,161 30,122,088 28,009,979 169,073,228

Accumulated depreciation and

amortization

At beginning of year 64,455,912 22,440,517 22,590,410 109,486,839

Depreciation and amortization 12,904,055 2,611,769 2,167,438 17,683,262

Disposals (3,222,439) (94,060) – (3,316,499)

Translation adjustments 403,610 499,400 48,204 951,214

At end of year 74,541,138 25,457,626 24,806,052 124,804,816

Net book value P=36,400,023 P=4,664,462 P=3,203,927 P=44,268,412

The above depreciation and amortization were distributed as follows:

September 30, 2016

(Unaudited)

September 30, 2015

(Unaudited)

Cost of services P=148,389 P=136,137

Operating expenses 13,225,021 12,530,094

P=13,373,410 P=12,666,231

9. Intangibles

Philippine Operations

On August 15, 2006, the Parent Company purchased the Trading Right of Mark Securities Corporation

amounting to P=5,000,000. On December 13, 2006, the BOD of the PSE, in its regular meeting approved

the application of the Parent Company as a Corporate Trading Participant in the PSE.

Hong Kong Operations

COLHK’s exchange trading right is carried at its cost of HKD3,190,000. The carrying value of the

exchange trading right is reviewed annually to ensure that this does not exceed the recoverable amount,

whether or not an indicator of impairment is present. The said exchange trading right is non-

transferable and cannot be sold to any third party independent of the total assets and liabilities of

COLHK. As at September 30, 2016 and December 31, 2015, the carrying value of COLHK exchange

trading right in Philippine peso amounted to P=19,848,499 and P=18,338,991, respectively.

The recoverable amount of exchange trading rights of COLHK has been determined based on a VIU

calculation. That calculation uses cash from projections based on a financial budget approved by

management covering a five (5)-year period, and a discount rate of 9.40%. Management believes that

any reasonably possible change in the key assumptions on which the exchange trading rights’

recoverable amount is based would not cause its carrying amount to exceed its recoverable amount.

Movements in exchange trading rights gross of allowance for impairment losses follow:

September 30, 2016

(Unaudited)

December 31, 2015

(Audited)

Beginning balance P=24,413,383 P=23,338,991

Translation adjustment 435,116 1,074,392

Ending balance P=24,848,499 P=24,413,383

40

10. Other Noncurrent Assets

September 30, 2016

(Unaudited)

December 31, 2015

(Audited)

Long-term time deposits P=200,000,000 P=−

Deposit to CTGF 13,724,200 13,724,200

Refundable deposits:

Rental deposits 4,857,974 4,142,089

Other refundable deposits 2,841,454 2,976,766

7,699,428 7,118,855

Input VAT 6,706,559 4,269,527

228,130,187 25,112,582

Less allowance for impairment losses on other

noncurrent assets 13,724,200 13,724,200

P=214,405,987 P=11,388,382

On June 24, 2016, the Parent Company availed of long-term interest-bearing time deposits totaling

P=200,000,000 with a foreign bank. The time deposits bear an interest rate of 4% percent per annum with

maturity period of five (5) years.

The Parent Company made an initial contribution on October 20, 2008 to the Clearing and Trade

Guaranty Fund (CTGF) of the SCCP amounting to P=8,200,000 as a prerequisite to its accreditation as a

clearing member of SCCP. The CTGF is a risk management tool of SCCP, whose primary purpose is to

protect the settlement system from any default by a clearing member. The amount of contribution was

computed based on the previous six months trading data and a calculation for the ideal fund level using

the Value at Risk (VAR) Model. The said amount was recalculated after six (6) months based on the

effective rate of eleven per cent (11%) applied to the actual netted trade value of the clearing member.

On August 20, 2009, the Parent Company made an additional contribution amounting to P=5,524,200 to

top-up the deficiency in the initial contribution.

In addition to the collection of the initial contribution and as part of the build-up plan for the CTGF,

SCCP collects a monthly contribution at the rate of 1/500 of 1% of the clearing member’s gross trade

value less block sales and cross transactions of the same flag.

Under SCCP Rule 5.2, the cash contributions made by the clearing members to the CTGF are

non-refundable. However, in consideration of the 100% increase in the CTGF contributions which took

effect on August 1, 2007, the BOD of SCCP has approved the full refund of contributions to the CTGF

upon cessation of the business of the clearing member and upon termination of its membership with

SCCP. Such amendment has been submitted for the further approval of the SEC. Pending the approval

of the SEC, the rule on non-refundability still applies. In view of this, the Parent Company made a full

provision for impairment losses amounting to P=13,724,200 in previous years.

Other refundable deposits include statutory deposits made to HK Exchanges, admission fees for HK’s

SFC and for HK Securities Clearing Company Ltd., and contributions to Central Clearing and

Settlement System Guarantee Fund.

41

11. Trade Payables

September 30, 2016

(Unaudited)

December 31, 2015

(Audited)

Customers P=8,514,470,683 P=6,479,279,657

Clearing house 336,664,863 59,868,655

Dividends payable 57,591 −

P=8,851,193,137 P=6,539,148,312

September 30, 2016 (Unaudited) December 31, 2015 (Audited)

Money

Balance

Security

Valuation-Long

Money

Balance

Security

Valuation-Long

Payable to customers:

With money balances P=8,514,470,683 P=48,661,882,550 P=6,479,279,657 P=38,259,806,585

No money balances − 1,635,469,647 − 1,049,613,478

P=8,514,470,683 P=50,297,352,197 P=6,479,279,657 P=39,309,420,063

Generally, trade payables to customers are noninterest-bearing and have no specific credit terms, while

trade payables to brokers are noninterest-bearing and are subject to automatic settlement on due date.

Payable to customers with money balances amounting to P=195,649,529 and P=255,596,013 as at

September 30, 2016 and December 31, 2015, respectively, were payable to COLHK’s clients in respect

of the trust and segregated bank balances received and held for clients in the course of the conduct of

regulated activities. These balances are payable on demand (see Note 5).

Trade payables to clearing house as at September 30, 2016 and December 31, 2015 were fully paid

subsequently in October and January 2016, respectively. These are noninterest-bearing and are settled

on two (2) trading days’ term and three (3) trading days’ term following the settlement convention of

HK and Philippines clearing houses, respectively.

12. Other Current Liabilities

September 30, 2016

(Unaudited)

December 31, 2015

(Audited)

Accrued expenses P=13,869,037 P=19,124,581

Due to BIR 11,192,729 16,085,261

Trading fees 3,551,197 1,653,463

Accrued management bonus – 14,514,857

Others 19,634,753 7,648,295

P=48,247,716 P=59,026,457

Accrued expenses and accrued management bonus pertain to accruals of operating expenses that were

incurred but not yet paid and accruals made for the officers and employees’ performance bonus.

Due to BIR comprise withholding, percentage and output taxes payable to the Philippine BIR.

Trading fees pertain to transaction costs and clearing fees on the purchase and sale of stocks that are

payable to the regulatory bodies.

‘Others’ account consist mainly of deposits of clients which were received after the cut-off time for the

processing of collections and which were credited to the clients’ trading accounts on the next business

day following the end of the reporting period.

42

13. Equity

Capital Stock

The details and movements of the Parent Company’s capital stock (figures and amounts in thousands)

follow:

September 30, 2016

(Unaudited)

December 31, 2015

(Audited)

Shares Amount Shares Amount

Common Stock - P=1 per share

Authorized 1,000,000 P=1,000,000 1,000,000 P=1,000,000

Issued and Outstanding

Balances at beginning

of the period

475,000

P=475,000 474,550 474,550

Issuance of common shares upon

exercise of stock options

1,000

1,000 450 450

Balances at end of the period 476,000 P=476,000 475,000 P=475,000

As of September 30, 2016 and December 31, 2015, the Parent Company has 31 and 32 stockholders,

respectively.

Retained Earnings

In compliance with SRC Rule 49.1 B Reserve Fund, the Parent Company is required to annually

appropriate ten percent (10%) of its audited net income and transfer the same to appropriated retained

earnings account. On December 11, 2006, the BOD approved the annual appropriation commencing on

the year 2006. Total appropriated retained earnings amounted to P=198,811,471 and P=169,021,759 as of

September 30, 2016 and December 31, 2015, respectively while total unappropriated retained earnings

amounted to P=675,433,408 and P=625,796,719 as of September 30, 2016 and December 31, 2015,

respectively.

During the BOD meeting on April 26, 2007, the BOD of the Parent Company approved a policy of

declaring an annual regular cash dividend of twenty percent (20%) of its net earnings.

The table below shows the cash dividends declared from COL’s unappropriated retained earnings for

the years 2016 and 2015:

2016

Cash Dividend Declaration Date Ex-date Record Date Payment Date

Regular

P0.11 per share March 31, 2016 April 12, 2016 April 15, 2016 April 22, 2016

Special

P0.39 per share March 31, 2016 April 12, 2016 April 15, 2016 April 22, 2016

2015

Cash Dividend Declaration Date Ex-date Record Date Payment Date

Regular

P0.12 per share March 30, 2015 April 13, 2015 April 16, 2015 May 6, 2015

Special

P0.38 per share March 30, 2015 April 13, 2015 April 16, 2015 May 6, 2015

43

On December 11, 2008, the Hong Kong Securities and Futures Commission (SFC) approved the

increase in the authorized capital stock of COLHK from 20,000,000 shares to 50,000,000 shares at

HK$1 par value. On February 19, 2009, the COLHK’s BOD declared a scrip dividend corresponding to

23,000,005 shares at HK$1 par value to its existing stockholders as of December 31, 2008.

On December 31, 2009, the Hong Kong SFC approved the increase in the authorized capital stock of

COLHK from 50,000,000 shares to 150,000,000 shares at HK$1 par value. On March 1, 2010, the

COLHK’s BOD declared a scrip dividend corresponding to 21,999,995 shares at HK$1 par value to its

existing stockholders as of December 31, 2010.

On February 3, 2011, COLHK’s BOD approved to pay a final dividend of HK$13,000,000 (65,000,000

shares multiplied by HK$0.20 scrip dividend per share) to stockholders as of record date of

February 3, 2011.

On February 7, 2013, COLHK’s BOD has proposed to pay a final dividend of HK$0.064 per share in

scrip.

14. Interest Income

September 30, 2016

(Unaudited)

September 30, 2015

(Unaudited)

Banks (Note 4) P=118,840,976 P=78,039,343

Customers (Note 7) 45,662,368 99,557,653

Others – 16,330

P=164,503,344 P=177,613,326

15. Personnel Costs

September 30, 2016

(Unaudited)

September 30, 2015

(Unaudited)

Salaries and wages P=46,714,516 P=45,901,695

Other benefits 6,470,960 5,573,069

P=53,185,476 P=51,474,764

Other benefits include monetized leave credits of employees and other regulatory benefits.

The above accounts were distributed as follows:

September 30, 2016

(Unaudited)

September 30, 2015

(Unaudited)

Cost of services P=33,799,543 P=32,147,357

Operating expenses 19,385,933 19,327,407

P=53,185,476 P=51,474,764

44

16. Employee Benefits

Stock Option Plan (SOP)

On July 12, 2000 and July 3, 2006, the Group granted stock options in favor of directors, senior

managers and officers of the Group as well as other qualified individuals determined by a Committee

constituted by the BOD to administer the SOP. As of December 31, 2006, a total of 46,000,000 stock

options were granted. The agreement provides for an exercise price of P=1.00 per share. These options

will be settled in equity once exercised. All options are exercisable one and a half years from

July 12, 2006, the effective date of listing of the Parent Company’s shares at the PSE, and will terminate

ten years from the said date. There was no new SOP granted as of September 30, 2016.

There have been no cancellations or modifications to the plan in 2016 and 2015.

The following table illustrates the number of and movements in stock options:

1st Tranche

September 30, 2016

(Unaudited)

December 31, 2015

(Audited)

Outstanding at beginning of period 1,000,000 1,450,000

Exercised during the period (see Note 13) (1,000,000) (450,000)

Outstanding at end of period – 1,000,000

These stock options have not been recognized in accordance with PFRS 2, Share-Based Payment, as these options were granted on or

before November 7, 2002. These options have not been subsequently modified and therefore do not need to be accounted for in accordance with PFRS 2.

The options have a contractual term of 10 years. All shares under the plan have been exercised as of

September 30, 2016.

The fair value of each option is estimated on the date of grant using the Black-Scholes Merton option

pricing model, taking into account the terms and conditions upon which the options were granted. The

fair value of options granted on July 12, 2000 and July 3, 2006 amounted to P=0.89 per share and P=1.04

per share, respectively.

The assumptions used to determine the fair value of the stock options granted on July 12, 2000 were (1)

share price of P=1.07 obtained through the use of the Discounted Cash Flow model since the stock was

not quoted at the time; (2) exercise price of P=1.00; (3) expected volatility of 44%; (4) option life of 10

years; and (5) risk-free interest rate of 15.61%.

The assumptions used to determine the fair value of the stock options granted on July 3, 2006 were (1)

share price of P=1.36 as the latest valuation of stock price at the time of the initial public offering; (2)

exercise price of P=1.00; (3) expected volatility of 24%; (4) option life of 10 years; and (5) risk-free

interest rate of 11.04%.

The expected volatility reflects the assumption that the historical volatility is indicative of future trends,

which may not necessarily be the actual outcome. Since the stock is not quoted at the time of grant date,

the Group used the historical volatility of the nearest market comparable available. Risk-free interest

rate is the equivalent 10-year zero coupon rate at the time of grant date.

45

Movements in the cost of share-based payment included in equity are as follows:

September 30, 2016

(Unaudited)

December 31, 2015

(Audited)

Balances at beginning of the period P=4,031,571 P=5,499,602

Movement on deferred tax asset on intrinsic

value of outstanding options (4,031,571) (1,468,031)

Movements during the period (4,031,571) (1,468,031)

Balances at end of the period P=– P=4,031,571

Retirement Benefits

The Parent Company has a funded, noncontributory defined benefit retirement plan covering

substantially all of its regular employees. The benefits are based on a certain percentage of the final

monthly basic salary for every year of credited service of the employees. The defined retirement benefit

obligation is determined using the projected unit credit method. There was no plan termination,

curtailment or settlement as of September 30, 2016 and December 31, 2015.

COLHK makes monthly contribution to a fund under the mandatory provident fund schemes ordinance

enacted by the Hong Kong Government. The plan is defined contribution. Under the plan COLHK

should contribute 5% of the monthly relevant income of all its qualified employees. The contribution

recognized as expense amounted to P=214,444 and P=246,257 in September 30, 2016 and 2015,

respectively.

17. Income Taxes

Current Income Taxes

The breakdown of provision for current income tax is as follows:

September 30, 2016

(Unaudited)

September 30, 2015

(Unaudited)

Regular corporate income tax P=74,914,977 P=69,818,283

Final income tax 23,767,672 15,607,665

P=98,682,649 P=85,425,948

Deferred Income Taxes

The components of the Group’s net deferred tax assets follow:

September 30, 2016

(Unaudited)

December 31, 2015

(Audited)

Unused tax losses of COLHK P=26,939,331 P=20,697,886

Retirement obligation 8,064,042 7,883,314

Allowance for credit losses on trade receivables

from customers 851,092 382,307

Accumulated translation adjustment (297,768) 2,246,511

Unrealized foreign exchange gain (41,008) (9,067)

Unrealized trading loss 6,430 60,590

Unamortized past service cost – 265,531

Cost of share-based payment – 4,031,571

P=35,522,119 P=35,558,643

Realization of the future tax benefits related to the net deferred tax assets is dependent on many factors,

including the Group’s ability to generate taxable income, within the carry-over period. The unused tax

losses of COLHK can be carried forward indefinitely to offset future profits.

46

As of September 30, 2016 and December 31, 2015, the Parent Company has temporary difference

arising from allowance for credit losses on other noncurrent assets amounting to P=13,724,200 for which

no deferred tax asset was recognized since management believes that it is probable that this temporary

difference will not be realized in the future.

18. Related Party Disclosures

a. The summary of significant transactions and account balances with related parties are as follows:

Category

Commission

income Interest income

Commission

expense Professional fees

Key management personnel

September 30, 2016 P=875,366 P=412,822 P=– P=–

September 30, 2015 1,417,947 573,797 – –

Other related parties:

Affiliates with common officers,

directors and stockholders

September 30, 2016 2,096,894 1,102,320 1,422 3,356,246

September 30, 2015 5,461,568 1,598,312 3,090 3,226,468

Directors

September 30, 2016 5,858,719 108,619 – –

September 30, 2015 17,353,249 360,301 – –

Category

Trade payables Trade receivables Terms Conditions

Key management personnel

September 30, 2016

P=55,179,234 P=7,096,840

3-day; non-

interest bearing/

Collectible or

payable on

demand; interest

bearing

Secured; no

impairment;

no guarantee December 31, 2015

76,796,152 9,706,066

Other related parties:

Affiliates with common officers,

directors and stockholders

September 30, 2016

9,957,522 55,216,954

3-day; non-

interest bearing/

Collectible or

payable on

demand;interest

bearing/Payable

upon

billing;non-

interest bearing

Secured;no

impairment;no

guarantee

December 31, 2015

28,000,372 –

Directors

September 30, 2016

49,102,079 28,400,058

3-day; non-

interest bearing/

Collectible or

payable on

demand; interest

bearing

Secured; no

impairment;

no guarantee

December 31, 2015

26,717,466 372,055

47

b. Compensation of key management personnel of the Group follows:

September 30, 2016

(Unaudited)

September 30, 2015

(Unaudited)

Short-term employee benefits P=19,894,015 P=21,053,536

Retirement costs 81,624 130,779

P=19,975,639 P=21,184,315

19. Leases

The Group leases its office premises under separate operating lease agreements expiring on various

dates and whose lease terms are negotiated every 1-3 years. Rental costs charged to operations

amounted to P=10,503,055 and P=10,147,001 in September 30, 2016 and 2015, respectively.

The future minimum lease payments are as follows:

September 30, 2016

(Unaudited)

December 31, 2015

(Audited)

Within one (1) year P=13,016,491 P=10,727,828

After one (1) year but not more than five (5) years 17,580,165 4,239,631

P=30,596,656 P=14,967,459

20. Capital Management

The primary objective of the Group’s capital management is to ensure that the Group maintains healthy

capital ratios in order to support its business, pay existing obligations and maximize shareholder value.

The Group manages its capital structure and makes adjustments to it, in light of changes in economic

conditions. No changes were made in the objectives, policies or processes during the period ended

September 30, 2016 and December 31, 2015.

The Amended Implementing Rules and Regulations of the SRC effective February 28, 2004 include,

among others, revisions in the terms and conditions for registration and subsequent renewal of license

applicable to both exchange trading participants and non-exchange broker dealers as follows: (a) to

allow a net capital of P=2.5 million or 2.5% of aggregate indebtedness, whichever is higher, for broker

dealers dealing only in proprietary shares and not holding securities, (b) to allow the SEC to set a

different net capital requirement for those authorized to use the Risk-Based Capital Adequacy (RBCA)

model, and (c) to require unimpaired paid-up capital of P=100.0 million for broker dealers, which are

either first time registrants or those acquiring existing broker dealer firms and will participate in a

registered clearing agency; P=10.0 million plus a surety bond for existing broker dealers not engaged in

market making transactions; and P=2.5 million for broker dealers dealing only in proprietary shares and

not holding securities.

The SEC approved Memorandum Circular No. 16 dated November 11, 2004 which provides the

guidelines on the adoption in the Philippines of the RBCA Framework for all registered brokers dealers

in accordance with SRC. These guidelines cover the following risks: (a) position or market risk, (b)

credit risks such as counterparty, settlement, large exposure, and margin financing risks, and (c)

operational risk.

The Parent Company being a registered broker in securities is subject to the stringent rules of the SEC

and other regulatory agencies with respect to the maintenance of specific levels of RBCA ratios. RBCA

is a ratio that compares the broker or dealer’s total measured risk to its liquid capital. As a rule, the

Parent Company must maintain an RBCA ratio of at least 110% and a net liquid capital (NLC) of at

least P=5.0 million or five percent (5%) of its aggregate indebtedness, whichever is higher. Also, the

48

Aggregated Indebtedness (AI) of every stockbroker should not exceed two thousand percent (2,000%)

of its NLC. In the event that the minimum RBCA ratio of 110% or the minimum NLC is breached, the

Parent Company shall immediately cease doing business as a broker and shall notify the PSE and SEC.

As of September 30, 2016 and December 31, 2015, the Parent Company is compliant with the said

requirement.

The Parent Company’s capital pertains to equity per books adjusted with deferred tax assets and assets

not readily convertible into cash.

The RBCA ratio of the Parent Company as of September 30, 2016 and December 31, 2015 are as

follows:

September 30, 2016

(Unaudited)

December 31, 2015

(Audited)

Equity eligible for net liquid capital P=1,137,966,037 P=1,029,597,528

Less: Ineligible Assets 227,339,132 197,401,134

NLC P=910,626,905 P=832,196,394

Position risk P=1,382,575 P=956,579

Operational risk 145,843,377 139,461,571

Counterparty risk 116 15

Total Risk Capital Requirement (TRCR) P=147,226,068 P=140,418,165

AI P=8,593,922,820 P=6,178,490,687

5% of AI 429,696,141 P=308,924,534

Required NLC 429,696,141 308,924,534

Net Risk-Based Capital Excess 480,930,764 P=523,271,860

Ratio of AI to NLC 944% 742.00%

RBCA ratio (NLC/TRCR) 619% 593.00%

The following are the definition of terms used in the above computation.

1. Ineligible assets

These pertain to fixed assets and assets which cannot be readily converted into cash.

2. Operational risk requirement

The amount required to cover a level of operational risk which is the exposure associated

with commencing and remaining in business arising separately from exposures covered by

other risk requirements. It is the risk of loss resulting from inadequate or failed internal

processes, people and systems which include, among others, risks of fraud, operational or

settlement failure and shortage of liquid resources, or from external events.

3. Position risk requirement

The amount necessary to accommodate a given level of position risk which is a risk to

which a broker dealer is exposed to and arising from securities held by it as a principal or in

its proprietary or dealer account.

4. Aggregate indebtedness

Total money liabilities of a broker dealer arising in connection with any transaction

whatsoever, and includes, among other things, money borrowed, money payable against

securities loaned and securities failed to receive, the market value of securities borrowed to

the extent to which no equivalent value is paid or credited (other than the market value of

margin securities borrowed from customers and margin securities borrowed from non-

49

customers), customers’ and non-customers’ free credit balances, and credit balances in

customers’ and non-customers’ account having short positions in securities subject to the

exclusions provided in the said SEC Memorandum.

In addition, SRC Rule 49.1 (B), Reserve Fund of such circular, requires that every broker dealer shall

annually appropriate a certain minimum percentage of its audited profit after tax and transfer the same

to Appropriated Retained Earnings. Minimum appropriation shall be 30%, 20% and 10% of profit after

tax for broker dealers with unimpaired paid up capital of P=10 million to P=30 million, between P=30

million to P=50 million and more than P=50 million, respectively.

The Parent Company’s regulated operations have complied with all externally-imposed capital

requirements as of September 30, 2016 and December 31, 2015.

COLHK monitors capital using liquid capital as provided for under Hong Kong’s Securities and Futures

Ordinance (Cap. 571) and Securities and Futures (Financial Resources) Rules (Cap. 571N). COLHK’s

policy is to keep liquid capital at the higher of the floor requirement of Hong Kong dollar

(HK$) 3,000,000 and computed variable required capital. As of September 30, 2016 and

December 31, 2015, COLHK is compliant with the said requirement.

21. Financial Risk Management Objectives and Policies

The main purpose of the Group’s financial instruments is to fund its operations. The Group’s principal

financial instruments consist of cash and cash equivalents, cash in segregated account, financial assets

at FVPL, trade receivables, other receivables, refundable deposits and long-term time deposits under

other non-current assets, trade payables and other current liabilities, which arise from operations.

The main risks arising from the Group’s financial instruments are credit risk, liquidity risk, foreign

currency risk and equity price risk. The BOD reviews and agrees policies for managing each of these

risks and they are summarized below:

Credit risk

Credit risk refers to the potential loss arising from any failure by counterparties to fulfill their

obligations, as and when they fall due. It is inherent to the stock brokerage business as potential losses

may arise due to the failure of its customers and counterparties to fulfill their trading obligations on

settlement dates or the possibility that the value of collateral held to secure obligations becoming

inadequate due to adverse market conditions.

The business model of the Group minimizes its exposure to credit risk. The Group’s customers, except

those granted by a credit line facility by the Parent Company, are required to deposit funds to their

accounts and their purchases are limited to their cash deposit. In order to manage the potential credit

risk associated with the Parent Company’s margin lending activities, the Group has established policies

and procedures in evaluating and approving applications for margin financing as well as the review of

credit performance and limits. In addition, the Parent Company requires its margin customers a Two

Peso (P=2) security cover for every One Peso (P=1) exposure. The security cover can either be in cash or

a combination of cash and marginable stock identified by the Parent Company using a set of criteria.

50

Aging Analyses of Financial Assets

The aging analyses of the Group’s financial assets as at September 30, 2016 and December 31, 2015 are

summarized in the following tables:

September 30, 2016 (Unaudited)

Past due but not impaired Total

Neither

past due nor

impaired 4-14 days

15-31

days

More than

31 days Impaired

Loans and receivables:

Cash and cash equivalents* P=8,539,111,461 P=– P=– P=– P=– P=8,539,111,461

Cash in segregated account 195,649,529 – – – – 195,649,529

Trade receivables 460,226,485 141,848,624 120,787,405 529,827,364 – 1,252,689,878

Other receivables 17,508,732 – – – 8,960,245 26,468,977

Long-term time deposits 200,000,000 – – – – 200,000,000

Refundable deposits 7,699,428 – – – – 7,699,428

Financial assets at FVPL 2,083,488 – – – – 2,083,488

Total P=9,422,279,123 P=141,848,624 P=120,787,405 P=529,827,364 P=8,960,245 P=10,223,702,761

*Excluding cash on hand

December 31, 2015 (Audited)

Past due but not impaired Total

Neither past due nor

impaired 4-14 days

15-31

days

More than

31 days Impaired

Loans and receivables:

Cash and cash equivalents* P=6,493,556,838 P=– P=– P=– P=– P=6,493,556,838 Cash in segregated account 255,596,013 – – – – 255,596,013

Trade receivables 281,162,220 63,717,839 60,878,758 671,325,239 – 1,077,084,056

Other receivables 8,425,177 – – – 8,960,245 17,385,422 Refundable deposits 7,118,855 – – – – 7,118,855

Financial assets at FVPL 1,673,427 – – – – 1,673,427

Total P=7,047,532,530 P=63,717,839 P=60,878,758 P=671,325,239 P=8,960,245 P=7,852,414,611

*Excluding cash on hand

Past due accounts pertain to margin accounts of the Parent Company earning interest ranging from 8%

to 18%. The account has no due date and becomes demandable only when equity percentage of the

customers falls below 33.33%.

The table below shows the credit quality by class of the financial assets of the Group:

September 30, 2016 (Unaudited)

Neither Past Due nor Specifically

Impaired

High Grade Standard Grade

Individually

Impaired

Total

Loans and receivables:

Cash and cash equivalents* P=8,539,111,461 P=– P=– P=8,539,111,461

Cash in a segregated account 195,649,529 – – 195,649,529

Trade receivables 1,252,689,878 – – 1,252,689,878

Other receivables – 17,508,732 8,960,245 26,468,977

Long-term time deposits 200,000,000 – – 200,000,000

Refundable deposits 7,699,428 – – 7,699,428

10,195,150,296 17,508,732 8,960,245 10,221,619,273

Financial assets at FVPL 2,083,488 – – 2,083,488

P=10,197,233,784 P=17,508,732 P=8,960,245 P=10,223,702,761

*Excluding cash on hand

51

December 31, 2015 (Audited)

Neither Past Due nor Specifically

Impaired

High Grade Standard Grade

Individually

Impaired

Total

Loans and receivables:

Cash and cash equivalents* P=6,493,556,838 P=– P=– P=6,493,556,838

Cash in a segregated account 255,596,013 – – 255,596,013

Trade receivables 1,013,366,217 63,717,839 – 1,077,084,056

Other receivables – 8,425,177 8,960,245 17,385,422

Refundable deposits 7,118,855 – – 7,118,855

7,769,637,923 72,143,016 8,960,245 7,850,741,184

Financial assets at FVPL 1,673,427 – – 1,673,427

P=7,771,311,350 P=72,143,016 P=8,960,245 P=7,852,414,611

*Excluding cash on hand

The Group’s bases in grading its financial assets are as follows:

Loans and Receivables

High grade

The Group’s loans and receivables, which are neither past due nor impaired, are classified as high

grade, due to its high probability of collection (i.e. the counterparty has the evident ability to satisfy its

obligation and the security on the receivables are readily enforceable).

Cash and cash equivalents, cash in a segregated account and long-term time deposits are considered

high grade since these are deposited with reputable banks duly approved by the BOD and have low

probability of insolvency.

Trade receivables from margin customers have no specific credit terms but customers are required to

maintain the value of their collateral within a specific level. Once the value of the collateral falls down

this level, customers may either deposit additional collateral or sell stock to cover their account balance.

Meanwhile, receivables from post-paid customers are required to be settled on two (2) trading days’

term for COLHK and three (3) trading days’ term for the Parent Company. The receivable balances

become demandable upon failure of the customer to duly comply with these requirements. As at

September 30, 2016 and December 31, 2015, P=1,109,654,360 and P=846,028,218 of the total receivables

from customers is secured by collateral comprising of cash and equity securities of listed companies

with a total market value of P=4,573,337,445 and P=3,700,094,576, respectively (see Note 7).

Transactions through the stock exchange are covered by the guarantee fund contributed by member

brokers and maintained by the clearing house.

Refundable deposits under other noncurrent assets is classified as high grade since the amount shall be

kept intact by (1) the lessor throughout the term of the contract and shall be returned after the term; and

(2) the government institutions as a requirement to conduct stock brokerage business and shall be

returned after the Group ceases to operate its business.

Standard grade

These are loans and receivables from counterparties with no history of default and are not past due as at

the end of the reporting period.

Financial Assets at FVPL

High grade

Companies that are consistently profitable, have strong fundamentals and pays out dividends.

As at September 30, 2016 and December 31, 2015, the Group’s financial assets at FVPL are classified

as high grade since these are with listed companies of good reputation. The Group’s exposure to credit

risk arising from default of the counterparty has a maximum exposure equal to the carrying amount of

52

the particular instrument plus any irrevocable loan commitment or credit facility.

The table below shows the maximum exposure to credit risk for the component of the consolidated

statements of financial position:

September 30, 2016

(Unaudited)

December 31, 2015

(Audited)

Cash and cash equivalents (see Note 4)* P=8,539,111,461 P=6,493,556,838

Cash in a segregated account (see Note 5) 195,649,529 255,596,013

Financial assets at FVPL (see Note 6) 2,083,488 1,673,427

Trade receivables (see Note 7) 1,249,852,905 1,075,809,699

Other receivables (see Note 7) 17,508,732 8,425,177

Long-term time deposits 200,000,000 –

Refundable deposits (see Note 10) 7,699,428 7,118,855

10,211,905,543 7,842,180,009

Unutilized margin trading facility 4,355,509,580 4,478,456,061

P=14,567,415,123 P=12,320,636,070 *Excluding cash on hand

There are no significant concentrations of credit risk within the Group.

Liquidity Risk

Liquidity risk arises from the possibility that the Group may encounter difficulties in raising funds to

meet commitments from financial instruments or that a market for derivatives may not exist in some

circumstances.

The Group manages its liquidity profile to meet the following objectives: a) to ensure that adequate

funding is available at all times; b) to meet commitments as they arise without incurring unnecessary

costs; and c) to be able to access funding when needed at the least possible cost.

As at September 30, 2016 and December 31, 2015, all of the Group’s financial liabilities, which consist

of trade payables and other current liabilities, are contractually payable on demand and up to sixty (60)

days’ term.

Correspondingly, the financial assets that can be used by the Group to manage its liquidity risk as at

September 30, 2016 and December 31, 2015 consist of cash and cash equivalents, cash in a segregated

account, financial assets at FVPL and trade receivables.

Market Risk

Market risk is the risk of loss to future earnings, to fair values or to future cash flows that may result

from changes in the price of a financial instrument. The value of a financial instrument may change as a

result of changes in interest rates, foreign currency exchanges rates, commodity prices, equity prices

and other market changes. The Group’s market risk originates from its holdings of equity instruments

and foreign currency-denominated financial instruments.

Equity Price Risk

Equity price risk is the risk to earnings or capital arising from changes in stock exchange indices

relating to its quoted equity securities. The Group’s exposure to equity price risk relates primarily to its

financial assets at FVPL which pertain to investments in shares of stock of companies listed in the PSE.

The Group’s policy is to maintain the risk to an acceptable level. Movement in share price is monitored

regularly to determine the impact on its financial position.

Since the carrying amount of financial assets subject to equity price risk is immaterial relative to the

consolidated financial statements, management believes that disclosure of equity price risk sensitivity

53

analysis as at September 30, 2016 and December 31, 2015 is not significant.

Foreign Currency Risk

The Group’s policy is to maintain foreign currency exposure within acceptable limits and within

existing regulatory guidelines. The Group believes that its profile of foreign currency exposure on its

assets and liabilities is within conservative limits for a financial institution engaged in the type of

business in which the Group is engaged.

The Group’s exposure to foreign currency exchange risk arises from its US Dollar-denominated cash in

banks amounting to US$96,537 and US$55,404 as at September 30, 2016 and December 31, 2015,

respectively.

Since the amount of US$-denominated cash in bank subject to foreign currency risk is immaterial

relative to the consolidated financial statements, management believes that disclosure of foreign

currency risk analysis as at September 30, 2016 and December 31, 2015 is not significant.

Offsetting of Financial Assets and Liabilities

The amendments to PFRS 7 require the Group to disclose information about rights to offset related

arrangements (such as collateral posting requirements) for financial instruments under an enforceable

master netting agreements or similar agreements. The effects of these arrangements are disclosed in the

succeeding tables:

September 30, 2016 (Unaudited)

Financial Instruments

Recognized at

End of Reporting

Period by Type

Gross Carrying

Amounts

(Before

Offsetting)

Gross Amounts

Offset in

Accordance with

the Offsetting

Criteria

Net Amount

Presented in

Statements of

Financial

Position

[a-b]

Effect of Remaining Rights of

Set-Off (Including Rights to Set

Off Financial Collateral) that do

not Meet PAS 32 Offsetting

Criteria

Financial

Instruments

Fair Value of

Financial

Collateral Net Exposure

[a] [b] [c] [d] [e] = [c-d]

Financial Assets

Receivable from customers P=1,115,816,477 P=– P=1,115,816,477 P=41,933,844 P=– P=1,073,882,633

Receivable from clearing house 38,860,437 – 38,860,437 – – 38,860,437

P=1,154,676,914 P=– P=1,154,676,914 P=41,933,844 P=– P=1,112,743,070

Financial Liabilities

Payable to customers P=8,514,470,683 P=– P=8,514,470,683 P=41,933,844 P=– P=8,472,536,839

Payable to clearing house 336,664,863

336,664,863 – – 336,664,863

P=8,851,135,546 P=– P=8,851,135,546 P=41,933,844 P=– P=8,809,201,702

December 31, 2015 (Audited)

Financial Instruments

Recognized at

End of Reporting

Period by Type

Gross Carrying

Amounts

(Before

Offsetting)

Gross Amounts

Offset in

Accordance with

the Offsetting

Criteria

Net Amount Presented in

Statements of

Financial

Position

[a-b]

Effect of Remaining Rights of Set-Off (Including Rights to Set Off

Financial Collateral) that do not

Meet PAS 32 Offsetting Criteria

Financial

Instruments

Fair Value of

Financial

Collateral Net Exposure

[a] [b] [c] [d] [e] = [c-d]

Financial Assets Receivable from customers P=846,028,233 P=– P=846,028,233 P=10,223,347 P=– P=835,804,886

Receivable from clearing

house 96,016,120 – 96,016,120 58,684,378 – 37,331,742

P=942,044,353 P=– P=942,044,353 P=68,907,725 P=– P=873,136,628

Financial Liabilities Payable to customers P=6,479,279,657 P=– P=6,479,279,657 P=10,223,347 P=– P=6,469,056,310

Payable to clearing house 59,868,655

59,868,655 58,684,378 – 1,184,277

P=6,539,148,312 P=– P=6,539,148,312 P=68,907,725 P=– P=6,470,240,587

54

22. Fair Value Measurement

The following table shows the carrying values and fair values of the Group’s assets and liabilities,

whose carrying values does not approximate its fair values as at September 30, 2016 and

December 31, 2015:

Carrying Values Fair Values

September 30, 2016

(Unaudited)

December 31, 2015

(Audited)

September 30, 2016

(Unaudited)

December 31, 2015

(Audited)

Financial Assets

Loans and receivables:

Refundable deposits P=7,699,428 P=7,118,855 P=6,706,453 P=6,200,755

The carrying amounts of cash and cash equivalents, cash in a segregated account, trade receivables,

other receivables, trade payables and other current liabilities, which are all subject to normal trade credit

terms and are short-term in nature, approximate their fair values. The carrying amount of long-term time

deposits approximate their fair values as at September 30, 2016.

Financial Assets at FVPL

The Group’s financial assets at FVPL are carried at their fair values as at September 30, 2016 and

December 31, 2015. Fair value of financial assets at FVPL is based on the closing quoted prices of

stock investments published by the PSE and the mutual fund providers, respectively.

Refundable Deposits

The fair value of the refundable deposits is based on the present value of the future cash flows

discounted using credit adjusted risk-free rates for a similar type of instrument using 2.8% to 3.33% as

at September 30, 2016 and December 31, 2015, respectively. There are no changes in the valuation

techniques in 2016 and 2015.

Fair Value Hierarchy

All assets and liabilities for which fair value is measured or disclosed in the consolidated financial

statements are categorized within the fair value hierarchy as follows:

September 30, 2016 (Unaudited)

Level 1 Level 2 Level 3

Asset measured at fair value:

Financial assets at FVPL P=2,083,488 P=– P=–

Asset for which fair values are disclosed:

Refundable deposits – – 6,706,453

December 31, 2015 (Audited)

Level 1 Level 2 Level 3

Asset measured at fair value:

Financial assets at FVPL P=1,673,427 P=– P=–

Asset for which fair values are disclosed:

Refundable deposits – – 6,200,755

For the period ended September 30, 2016 and the year ended December 31, 2015, there were no

transfers among levels 1, 2 and 3 of fair value measurements.

55

23. Contingency

As discussed in Note 7, on April 21, 2014, a Decision in favor of the Group was issued by the Court of Tax

Appeals (CTA) granting the Group’s Petition for the refund and/or issuance of tax credit certificate (TCC)

in the amount of P=8,960,245. On May 8, 2014, the CIR filed its Motion for Review which was later denied

for lack of merit in CTA’s Resolution dated June 2, 2014. On July 5, 2014, the CIR filed a Petition for

Review with the CTA En Banc requesting said Court to reconsider, reverse, and set aside the Decision dated

April 15, 2014 and Resolution dated June 2, 2014. On December 15, 2015, the CTA En Banc denied the

motion for reconsideration filed by the Commissioner of Internal Revenue (CIR). On April 6, 2016, the

Supreme Court (SC) Third Division likewise denied the CIR’s petition for review on certiorari. On August

1, 2016, the SC Third Division issued a decision denying with finality the CIR’s motion for reconsideration,

effectively affirming the Decision of the Court of Tax Appeals Third Division ordering the CIR to issue a

tax credit certificate in favor of the Parent Company in the amount of P=8,960,245.

As of September 30, 2016, the Parent Company is yet to receive the notice of entry of final judgement from

the SC.

24. EPS Computation

September 30, 2016

(Unaudited)

September 30, 2015

(Unaudited)

Net income P=316,926,401 P=246,401,844

Weighted average number of shares for basic

earnings per share 475,500,000 474,775,000

Dilutive shares arising from stock options – 1,000,000

Adjusted weighted average number of shares of

common shares for diluted earnings per share 475,500,000 475,775,000

Basic earnings per share P=0.67 P=0.52

Diluted earnings per share P=0.67 P=0.52

24. Segment Information

For management purposes, the Group is organized into business units based on its geographical location

and has two (2) reportable segments as follows:

Philippine segment, which pertains to the Group’s Philippine operations.

Hong Kong segment, which pertains to the Group’s HK operations.

The following tables present certain information regarding the Group’s geographical segments:

September 30, 2016 (Unaudited) Philippines Hong Kong Elimination Total

Revenue from external customers:

Commissions P=483,443,877 P=7,406,001 P=– P=490,849,878

Interest 164,501,901 1,443 – 164,503,344

Others 2,405,606 971,556 – 3,377,162

Inter-segment revenue 21,835,886 (21,835,886) –

Segment revenue 672,187,270 8,379,000 (21,835,886) 658,730,384

Cost of services (138,888,200) (13,255,832) – (152,144,032)

Operating expenses (76,298,203) (29,132,489) 21,766,322 (83,664,370)

Depreciation (13,205,431) (19,590) – (13,225,021)

Total expenses (228,391,834) (42,407,911) 21,766,322 (249,033,423)

Income (loss) before income tax 443,795,436 (34,028,911) (69,564) 409,696,961

(Provision for) benefit from income tax (98,384,767) 5,614,207 – (92,770,560)

Net income (loss) P=345,410,669 (P=28,414,704) (69,564) P=316,926,401

56

Philippines Hong Kong Elimination Total

Segment assets 9,875,811,270 613,658,631 (137,245,316) P=10,352,224,585

Segment liabilities 8,733,556,595 221,769,937 (2,424,446) 8,952,902,086

Capital expenditures:

Tangible fixed assets 37,811,612 32,902 – 37,844,514

Cash flows arising from:

Operating activities 2,530,692,606 (10,800,204) – 2,519,892,402

Investing activities (237,804,467) (32,903) – (237,837,370)

Financing activities (236,500,000) – – (236,500,000)

December 31, 2015 (Audited)

Philippines Hong Kong Elimination Total

Revenue from external customers:

Commissions P=456,763,490 P=30,119,942 P=– P=486,883,432

Interest 233,164,336 73 – 233,164,409

Others 16,222,006 767,745 – 16,989,751

Inter-segment revenue 45,923,814 – (45,923,814) –

Segment revenue 752,073,646 30,887,760 (45,923,814) 737,037,592

Cost of services (180,581,144) (16,072,670) – (196,653,814)

Operating expenses (150,058,761) (56,752,790) 45,768,514 (161,043,037)

Depreciation and amortization (17,492,178) (36,536) – (17,528,714)

Income (loss) before income tax 403,941,563 (41,974,236) (155,300) 361,812,027

Benefit from (provision for) income tax (106,044,448) 6,925,763 – (99,118,685)

Net income (loss) P=297,897,115 (35,048,473) (155,300) P=262,693,342

Segment assets P=7,411,524,095 P=680,109,210 (P=138,802,287) 7,952,831,018

Segment liabilities 6,374,148,517 265,647,180 (3,955,697) 6,635,840,000

Capital expenditures:

Tangible fixed assets 25,626,480 486,856 – 26,113,336

Cash flows arising from:

Operating activities 2,257,704,153 (141,354,690) – 2,116,349,463

Investing activities (25,625,404) (486,856) – (26,112,260)

Financing activities (236,825,000) – – (236,825,000)

57

SCHEDULE I

COL FINANCIAL GROUP, INC. AND SUBSIDIARY

SCHEDULE SHOWING FINANCIAL SOUNDNESS

PURSUANT TO SRC RULE 68, AS AMENDED

September 30, 2016 September 30, 2015

Profitability ratios:

Return on assets 3% 3%

Return on equity (annualized) 31% 26%

Net profit margin 48% 42%

Solvency and liquidity ratios:

Current ratio 1.12:1 1.17:1

Debt to equity ratio 6.59:1 5.56:1

Quick ratio 1.12:1 1.17:1

Asset to equity ratio 7.62:1 6.57:1